It’s easy to swipe a credit card – just slide the card through the slot in the machine with the stripe on the back of your card at the bottom, facing left. Or on a machine that requires you to swipe your card horizontally rather than vertically, just make it so the front of your card is facing up. Swiping a credit card isn’t the only way to complete a purchase with one, though. Most cards have chips now, which you may be asked to “dip” (or insert) into a card reader, chip-end first and facing up. Some cards also use RFID wireless technology and allow you to simply tap a reader to pay. But you still might be asked to swipe instead, depending on the merchant.
Here’s how to swipe a credit card (and more):
Swiping: With the stripe on the back of your card at the bottom and facing left, move the card through the slot on the card reader. If the machine has your card go in flat, face the stripe toward the reader and make sure the front of your card is facing up.
Inserting in a gas pump or other kiosk: The machine will have a picture on it indicating which way to put your credit card in. It may be horizontally or vertically. Just make sure to position the stripe on the back of your card as it is in the picture.
Inserting into a chip reader: Stick the chip end of your card into the slot on the reader, with the front of your card facing upward. Leave it in until the machine tells you to take it out.
Tapping an RFID reader: If your card has RFID wireless capability and the merchant has an RFID reader (ask at checkout), you can simply tap your card on the reader when prompted. Few RFID credit cards are available. Capital One Savor is a notable example.
Most new credit cards use chip technology. But even if your card has a chip, you won’t always have to insert it. Some merchants still ask customers to swipe. In those cases, you may have to sign a screen or receipt to complete the transaction.
When you use a credit card for the first time, you should use it responsibly. If used wisely, a credit card can be a powerful financial tool that can save you money in interest down the road. If you’re reckless with it, you may be facing insurmountable debt that could take years to get under control.… read full answer
How you manage your first credit card will serve as an indicator for future credit inquiries, so it’s important you use your card to make a good first impression.
Here are some tips for when you use a credit card for the first time:
Use the card on a regular basis. This doesn’t mean to go on a series of spending frenzies. Instead, use your credit card for the first time with a manageable amount of purchases from time to time. Activity is one of the factors will look at when evaluating your account for a credit limit increase.
Always pay your bill on time. Try to make your payment several days before the due date. Don’t assume your payment will automatically make it to the issuer by the due date. When you use your credit card for the first time, starting out with timely payments are a critical factor in determining your credit score. A payment a day late is still a late payment, and the issuer won’t care why.
Pay off the entire balance every month. You’ll get a boost in your credit score when you don’t carry a balance, but you’ll also avoid paying interest on your purchases. Also, a credit card you use for the first time will likely have a low credit limit, having a balance reduces your available credit.
Utilization. You’ll want to maintain a low credit-to-debt ratio. The recommended utilization is less than 30% on the first credit card you use, and all future credit cards. If you have to make an unexpected purchase that will take a chunk out of your credit limit, pay it off as soon as you can. Don’t wait for the bill to come before you pay.
As you’re using your card for the first time, and building your credit, be sure to monitor your account for any suspicious activity. Take precautions to protect yourself from fraud. Never give out your credit card or PIN over the phone, if you did not make the call. Memorize passwords and PINs and keep them in a secure location.
Credit cards are financial products that provide a line of credit to use for making purchases. When you use a credit card, you’re borrowing money from the credit card’s issuer to make the transaction, and then repaying that loan at the end of each billing cycle, either in part or in full. By paying the bill in full each month, you can avoid being charged interest. If you can’t pay your balance in full, at least make the minimum payment required by the due date. Interest will still be applied to the remaining balance, but you won’t damage your credit score.
Many credit cards reward cardholders with cash back, points or miles for every purchase made. Plus, the best credit cards often come with signup bonuses that cardholders can earn after meeting a minimum spending requirement in the first few months. Some credit cards offer low introductory interest rates, too.
Generally, credit cards with the best rewards, rates, and benefits go to people with high credit scores, a lot of income, and little-to-no debt. Essentially, the most proven and creditworthy individuals get the best credit cards. But if you’re new to credit, credit cards are the best credit-building tools around. Even if you never use the card to make purchases, the issuer will report positive information to the credit bureaus every month. And it’s very easy for someone with no credit to get a credit card, especially a secured card where your credit limit is based on how much you put down as a security deposit.
This isn’t charity, though. Credit cards offer short-term loans and give rewards because it’s profitable for credit card issuers. If a cardholder decides to pay off a credit card balance over time, they’ll have to pay interest. And if they have the chance to earn rewards, they’re likely to spend more than they would otherwise.
Credit cards also work for transactions other than purchases, including balance transfers and cash advances, which have the potential to be even more profitable for issuers. Balance transfers give people the chance to repay existing debt with a lower interest rate, for a fee – usually 3% to 5% of the transferred amount. Cash advances let you withdraw cash from your credit line, but a high fee and interest rate apply right away.
How Credit Cards Work:
Credit cards allow users to buy now and pay later, even over the course of months.
If cardholders don’t pay their full balance by the due date each month, interest charges are added to the balance each day.
Credit cards allow cardholders to build credit, unlike debit cards. Having good credit is extremely important when it comes to renting an apartment or buying a home, and can get cardholders better rates on things like insurance and mortgages.
Some credit cards reward cardholders for making purchases. Some cards charge annual membership fees.
Credit card approval depends on an applicant’s overall creditworthiness. Credit history, income and debt obligations are important factors.
Now that you’ve been introduced to credit cards in general, it’s time to get better acquainted with the various types of credit cards that exist, the ways in which they could cost you if you’re not careful, and why you really should get one at the end of the day. You can find all of that and more below.
Types of Credit Cards
There are well over 1,000 credit card offers on the market right now. That might seem overwhelming, but credit cards can be grouped into several categories that make them more digestible.
Cash back credit cards reward users by returning a certain percentage of each purchase made. You can then redeem the cash back that you earn for credits toward your card’s bill, paper checks, bank account deposits, or gift cards for your favorite stores. The options vary by card.
Travel rewards credit cards offer points or miles on purchases that you can then redeem to pay for recent travel expenses and/or future trips. Some travel credit cards are affiliated with specific airlines, hotels or other travel companies. Others give rewards that work equally well for all travel.
Business credit cards can only be used for business purchases and are only available to business owners or other company representatives. They usually reward users with cash back or travel miles, often providing bonus rewards in purchase categories popular with the business community. Business credit cards also come with benefits particularly useful to business people, like airport lounge access and helpful expense tracking tools.
Students with limited or no credit history can get better credit cards than their lack of experience would otherwise merit. Credit card issuers recognize that college graduates are likely to earn more in their lifetime than non-graduates. Students also tend to be relatively young. That is a combination that could lead to years and years of highly profitable banking needs for a financial institution that gets in early to fulfill.
Secured cards require a security deposit, which then acts as your credit limit (the amount you can spend on your card). Since you can only spend as much as you’ve deposited, the risk is much less for issuers, and they’ll approve less creditworthy individuals who may not be able to get other cards. Secured credit cards can help you build credit just like any other credit card, however.
There are plenty of other ways to segment the credit card market, too, including by the credit rating required for approval. To learn more, check out WalletHub’s breakdown of all the different types of credit cards available right now.
How Does Credit Card Interest Work?
Credit card interest is charged on whatever balance you carry from billing period to billing period. Credit card interest rates are some of the most expensive interest rates you’ll come across, so it’s best to pay your bill in full each month. If you have a balance remaining after the due date, interest charges are applied immediately. Even worse, interest continues to be added on each day, and the previous day’s interest becomes part of the balance you owe interest on the next. You have to pay two consecutive bills in full to break this cycle.
If you can’t pay your full credit card bill by the due date, be sure to make at least the minimum payment. Minimum payments differ card-to-card but are usually a flat fee, like $25, or a small percentage of your balance, like 2%-3%. Making the minimum payment does not prevent interest from being charged on the remaining balance, but it does prevent you from being charged late fees and your credit score from being damaged.
For a more in-depth look at credit card interest, how it works, and mistakes to avoid, check out WalletHub’s credit card interest guide.
Credit Card Fees
An annual fee is the yearly cost of simply owning whatever credit card you have. There are plenty of credit cards with no annual fees, so it’s easy to avoid paying if that’s your priority.
There are other fees that could come into play, too. For example, late fees are assessed when you don’t pay your credit card bill on time, and are usually around $35-$38. Balance transfer fees apply when you move a debt from a credit card or loan to a new credit card account. And cash advance fees apply when you use your credit card to get cash from an ATM or bank teller. Balance transfer and cash advance fees are usually either a percentage (like 3%-5%) or a flat fee (typically around $10), whichever of those is more.
Yes, you should get a credit card. If you’re able to get a credit card and use it responsibly, the benefits far outweigh any potential negatives. For instance, using a credit card is the easiest way to build your credit, which is important for many things you’ll do in life. Even just having open credit cards, regardless of how often you use them, helps build credit.
For personalized credit card recommendations, you can also sign up for a free WalletHub account. It’s easier than ever now to get a credit card, and with all of the great rewards and other perks to choose from, there’s little reason to wait.
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