Managing finance is a complex task and it's very easy to fall into a debt trap if you misuse the power of free credit. Credit card provides you the power but it never suggests that this power is unlimited. You have to pay the dues at the end of the free credit period but some customers are always on the top of the defaulter list.
To avoid getting into trouble in future, it is advisable to understand your credit personality and choose the credit card which suits you the best. Companies provide credit cards with features like different interest rates, reward structure, credit limits etc. Understanding the way you deal with credit will make it easier to choose the best card for you. Let's see what kinds of credit personalities exist and what card they should opt for.
The Beginner: For beginners, like college pass outs, it is advisable not to go for cards with high credit limits. This is because your financial wit has never been tested, so you better be cautious. Once you are sure that you can manage your finances well, you can opt for credit cards with a higher limit.
The Disciplined: You have been there and done it all. You are great at financial planning and you never default on your monthly payments and never spend beyond your means. Reward offers don't alter your spending pattern.
For the disciplined individuals, the best suited card is one with cash back facility and a good reward structure. The reward points should accrue irrespective of the type of purchasing done and can be redeemed at one go. Interest rate on your card doesn't matter much as you always pay on time.
The Carefree: You love spending and believe that spending is the motivation for earning. You plan things beforehand but don't mind going overboard at times. You cross your spending limit at times and fail to pay your credit card bill on time. The most important feature you should look for in a credit card is the interest rate. As you carry forward the balance your interest expense is going to be high. It's advisable to choose the card which offers the lowest interest rate. You should also make sure that your card does not have any annual maintenance charges attached to it.
The Complete Mess: You don't understand financial management. You fail to pay the minimum amount due on your credit card. All customer care executives of your bank know you by name and are in constant touch with you. You always end up paying heavy interest and late payment charges.
It is better to use prepaid cards as it will save a great deal of money which you pay in the form of interest and various charges. This will prevent you from spending beyond your means.
The Credit Fearing: You never wanted a credit card in the first place. According to you being in debt is a crime. You applied for the card just because it made your life easy in some scenarios like booking air tickets and overseas purchases. You only swipe it in some kind of emergency and it goes unused at times for months.
The best card which will suit your needs is the one with no annual maintenance charge. You never make late payments and you are not a frequent user so interest rate and reward structure of the card doesn't matter much for you.
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