Everything to Know About Credit Cards: A Beginner's Guide

Credit cards can be a bit overwhelming, especially for beginners. They offer rewards, cashback, and points, but also come with fees and interest rates.

Understanding the different types of credit cards is key to making the most of them. There are cashback credit cards, rewards credit cards, and balance transfer credit cards, each with its own benefits and drawbacks.

Most credit cards have an annual fee, which can range from $0 to $500 or more. Some cards also have a foreign transaction fee, which can add up quickly when traveling abroad.

It's essential to read the fine print and understand the terms and conditions of your credit card. This includes the interest rate, late payment fees, and any other charges that may apply.

Credit cards typically charge a higher annual percentage rate (APR) compared to other forms of consumer loans.

Interest charges on unpaid balances are usually imposed about one month after a purchase, unless there's a 0% APR introductory offer. This is why paying off balances before the grace period expires is a good practice.

By law, credit card issuers must offer a grace period of at least 21 days before interest on purchases can begin to accrue. It's essential to understand whether your issuer accrues interest daily or monthly, as the former translates into higher interest charges.

Credit cards typically charge a higher annual percentage rate (APR) vs. other forms of consumer loans.

Credit card issuers will issue you a line of credit based on your credit report, borrowing habits, and income. Each credit card you take out will have its own spending or credit limit.

Interest charges on any unpaid balances charged to the card are usually imposed approximately one month after a purchase is made. This is unless there's a 0% APR introductory offer in place for an initial period of time after account opening.

By law, credit card issuers must offer a grace period of at least 21 days before interest on purchases can begin to accrue. This is why paying off balances before the grace period expires is a good practice when possible.

You can borrow up to the entire credit limit, although this is not recommended. As you pay down the balance, you can continue to borrow up to the spending limit.

Some credit cards come with more robust security features than debit cards, which is why many people prefer to shop with a credit card.

Getting started with credit cards can be a bit tricky, especially if you don't have any credit history. If you don't have any credit, merchants or banks are less likely to extend credit to you since you're an unproven borrower.

One of the simplest ways to get started is to open a secured credit card, which requires you to put down a deposit that serves as your credit limit. This way, the lender takes on little to no risk, and you get to build your credit history.

Becoming an authorized user on an established credit account, such as a parent or spouse, is another way to start building credit. This means their good credit habits will appear on your account, adding longevity to your credit report.

Most major credit cards are issued by banks, credit unions, or other financial institutions. These cards often come with rewards such as airline miles, hotel room rentals, or cash back on purchases.

Many retailers issue branded versions of credit cards, which can be used only to make purchases from the issuing retailers. These cards may offer perks like special discounts or promotional notices.

Secured credit cards are a type of credit card that requires a deposit, typically refundable after responsible usage. Unsecured credit cards, on the other hand, don't require a security deposit, but often have higher interest rates and fees.

Here are the main types of credit cards:

There are several types of credit cards to choose from, each with its own unique features and benefits.

Most major credit cards, such as Visa, Mastercard, Discover, and American Express, are issued by banks, credit unions, or other financial institutions.

Rewards credit cards are a popular type of credit card, offering incentives like airline miles, hotel room rentals, and cash back on purchases.

Store credit cards, on the other hand, are issued by national retailers and can only be used to make purchases from the issuing retailers.

Secured credit cards are a type of credit card that requires a security deposit, which functions as insurance for the credit card company.

Unsecured credit cards, by contrast, do not require a security deposit and offer higher lines of credit and lower interest rates.

Prepaid debit cards are similar to secured credit cards, with the available funds matching the money you deposit in a linked bank account.

Some credit cards, like no-annual fee credit cards, don't charge a yearly fee to access and use the card.

Here are some common types of credit cards:

A debit card is a type of card that allows you to spend money directly from your checking account.

Using a debit card has no impact on your credit score, unlike a credit card. It works by pulling the money you spend directly from your personal funds, so you won't have to worry about monthly bills or minimum payments.

The funds in your debit card account are linked to your checking account, so you can't overspend beyond what you have in your account.

Debit cards are linked directly to your current bank account, making purchases almost instantaneous.

This means that every transaction you make reduces your available funds in real-time.

APR stands for Annual Percentage Rate or sometimes seen as APRC, which means Annual Percentage Rate Charged. It's the interest rate charged on the credit card balance if the balance is not paid in full (before the payment date).

Interest is the cost of the credit charged by the credit card provider, and interest rates can vary from 13.8%* to 22.9%* in Ireland. Some credit card providers will offer a 0% rate, but this is typically for a limited period, for example, 6 months.

Some people take advantage of a 0% interest period to transfer their balance to a different credit card provider, which can be done to move to a lower interest rate and make repayments more affordable. This can give you a bit of breathing room on the interest to pay down the balance.

To avoid being charged interest or late payment fees, you must pay your statement balance by the due date. The minimum payment is the lowest amount you can pay by the due date to avoid being charged a late payment fee, but be aware that if you only pay the minimum payment (or anything lower than the full statement balance), you'll carry a balance over to the next billing period and be charged interest on that amount.

Here's a breakdown of common fees and other charges you may encounter:

APR stands for Annual Percentage Rate or sometimes seen as APRC, which means Annual Percentage Rate Charged. It's the interest rate charged on your credit card balance if you don't pay it in full before the payment date.

In Ireland, interest rates can vary from 13.8% to 22.9%. Some credit card providers offer a 0% rate for a limited period, typically 6 months, as an incentive to switch from one provider to another. This is known as a 'balance transfer'.

The interest-free period is generally up to fifty-six (56) days if you pay your bill in full before the payment date. Be aware that this doesn't apply to cash withdrawals in most cases.

You can be charged a transaction fee for taking out cash, on top of the interest charged for the cash you've taken out. The rate of interest charged and transaction fees vary significantly between providers.

Here's a breakdown of the common fees you may encounter:

Adding someone as an authorized user on your credit card account can be a great way to help their credit score. If you're having trouble getting approved for a credit card, being added to someone else's account can make a big difference.

An authorized user has full spending abilities on the credit card, which means they can make purchases and earn rewards. They usually have limited benefits, but it's still a great way to learn about credit management.

Being an authorized user can also help you build credit history, which is essential for getting approved for loans or other credit products.

Managing your credit card requires discipline and a solid understanding of how credit cards work.

The minimum payment on your credit card bill is the amount the credit card provider lists as the minimum required payment, which varies between 2%-5% of the balance due.

Paying only the minimum payment can lead to a long time to pay off your credit card balance. For example, if you have a balance of €1000 on your credit card and pay only the minimum payment, it would take 7 years and 11 months to clear the balance with interest.

It's essential to keep your credit utilization ratios low, which means keeping your balance below 30% of your credit limit. For instance, if you have a $5,000 credit limit, keep your balance under $1,500.

Consistently using and paying off your balance can help you establish a positive payment history, which is a significant factor in calculating your credit score.

To avoid late fees, set up auto-payments with and for your credit card. This way, you won't have to worry about forgetting to pay your bill on time.

The statement balance on your credit card bill is the amount charged during your most recent billing period, and you must pay this amount by the due date to avoid being charged interest or late payment fees.

Here's a breakdown of common fees you may encounter on your credit card bill:

Always pay your balance on time and in full to avoid interest charges and debt. Never charge more than you can afford, and keep your credit utilization ratios low.

To build a good credit history, make regular, on-time payments, avoid late payments, keep credit utilization under your credit limit, and maintain a low debt-to-income ratio.

Credit cards can be tricky to understand, but knowing the basics can save you a lot of stress and money.

The annual percentage rate (APR) is the interest rate charged on your credit card balance if you don't pay it off in full by the payment date. It can range from 13.8% to 22.9% in Ireland, and some credit cards offer a 0% rate for a limited period, usually 6 months.

Annual fees can be charged just for having the card, and some cards can charge up to $550 per year. But don't worry, some cards have no annual fees at all.

Introductory APR offers can be a great way to avoid additional interest charges on purchases and balance transfers, but be sure to read the terms and conditions to know how much you'll be charged once the offer ends.

Here's a breakdown of some common fees you might encounter:

It's essential to understand your credit card bill and the different numbers on it. The statement balance is the amount charged during your most recent billing period, and you must pay this by the due date to avoid interest or late payment fees.

Credit card rewards and benefits can be incredibly valuable, but they can also be confusing. Each rewards card earns a type of rewards "currency" like American Express Membership Rewards points or Hilton Honors points.

The value of these currencies can vary, so it's a good idea to check out the latest TPG valuations chart to get an idea of what each rewards type is worth. Some cards earn rewards at a fixed rate, like the Capital One Venture Rewards Credit Card, which earns 2 Capital One miles per dollar spent.

Other cards have bonus-earning categories, like the Chase Sapphire Preferred Card, which earns 3 Ultimate Rewards points per dollar spent on dining and travel purchases. To earn the welcome bonus, you'll need to spend a certain amount of money in a given period of time, which can be hundreds or thousands of dollars in value.

If you're new to credit cards, starting with a cash-back card can be a great way to solidify your good credit habits and enjoy simple rewards redemptions. The Citi Double Cash Card, for example, earns 2% cash back on all purchases.