Tips for Thought

Getting Your First Credit Card?
Here's What You Need to Know

A critical milestone in adulthood is applying for and choosing a credit card for the first time. While many are familiar with how these cards generally work, it always helps to be prepared before applying for one. Here’s what to know before applying for a credit card:

  1. You’ll start small.

Shopping around for the right credit card requires a lot of research. While it’s tempting to get a card with rich rewards and perks—chances are, you won’t get them quick. The reason? These cards are only available to individuals with excellent credit scores that meet a specific criterion.

Instead, you’ll most likely get a product for people with little to no credit history. However, that doesn’t mean you won’t get any benefits! Some student credit cards have welcome bonuses, introductory Annual Percentage Rates (APR), and fantastic bonuses!

  1. No credit yet? Get secured credit cards.

Applying for a credit card is one way to start building credit. However, individuals with zero credit scores can start with a secured credit card. These products can help first-time holders develop their scores quickly from scratch with tempting bonuses.

  1. Your first credit card can make or break your credit score.

Building credit requires having a credit card. However, some factors can easily affect your credit score. Some of these include:

  • Your payment history
  • The amount owed
  • Length of your credit history
  • Types of accounts
  • Number of new credits

Certain habits like late payments, getting too close to the credit limit, or maxing out your card can affect your score.

  1. Always check the rates and fees before applying.

Most credit cards come with specific rates and fees like:

  • Annual fee. The amount cardholders need to pay yearly.
  • Annual Percentage Rates (APR). These are the interest rate you’ll pay on balances monthly. Some balances you may need to pay include balance transfers and cash advances. Late payments may incur penalty APRs.
  • Foreign transaction fees. These refer to charges made outside the country.
  • Late fees. These are penalties for individuals who fail to pay on time.
  1. Pay more than the minimum.

Credit card statements offer minimum payment due, i.e., the smallest amount you need to pay to keep your account in good standing. Minimum fees only cover last month’s interest and fees, while a small amount covers the current underlying balance.

  1. Avoid paying late if you can help it.

Late fees are avoidable if you pay diligently and consistently. Individuals with late payments could risk having a low credit score, thus ruining potential financial benefits.

There are many factors to keep in check before getting a credit card. If you need help choosing the right option, consider speaking with a financial expert. Additionally, you can look into your needs and see whether a particular card can help build your credit.

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Tips for Thoughts

Copyright 2022 | All Rights Reserved.

Tips for Thoughts

Copyright 2022 | All Rights Reserved.