Everyone remembers their first credit card. For some, the memory marks the beginnings of a successful financial journey… For others, it marks the beginning of a series of ill-advised purchases with the accompanying high-interest rates – and a descent into the murky waters of late payment fees, over-the-limit fees and a myriad of other ugly credit card surprises?
For those of you who are eager to tread into the world of first-time credit card usage, take heed of the words above and consider how you want to remember your initial credit card experience. If you hope to harbor happy memories and build a healthy credit score – a nice perk of responsible credit card use – read the following tips to make the right choice.
- Know exactly what you’re getting into. When it comes to picking your plastic, be it your first or your fiftieth, it’s crucial you conduct proper research and understand the basics of the card’s terms. This means familiarizing yourself with the interest rate, the cash advance rate, late fees, annual fees, application fees, account services fees, over-the-limit fees and any other monetary charge you might be faced with other than your purchases. It’s also essential you understand how and when you will be billed, how much your minimum payment is, when your payment is due, whether or not you have a grace period in which to pay and, finally, what your payment options are.
- Keep the income flowing. Creditors will want to know about and verify your income, especially if you’ve never taken out a line of credit. In fact, if you’re under 21 and want to apply for a card without a cosigner, federal law requires credit card issuers make sure you have steady income.
- Check your credit. According to federal law, everyone is entitled to one free credit report per year. Your credit report can alert you to any issues – such as unpaid parking fines, medical bills, student loan problems, etc. – that could make things difficult. What’s more, the information on your credit report directly affects your credit score – and your credit score directly affects the interest rate you might be able to get on a credit card.
- Compare your options. Once you’ve done your due diligence, it’s time to decide which cards are available to you and which one best fits your needs. This is the time to review the cards’ rewards program, possible sign-up bonuses and other benefits such as airline mileage or gas credit.
- Consider a secured card. If you’re short on credit history or have none at all – both of which are barriers to securing your own card – it might be a good idea to apply for a secured card. The way it works is your initial deposit doubles as your spending limit, so you’ll never go over your max, which strengthens your credit score, as will making your monthly payments on time. Plus, for as long as you have the credit card and use it responsibly, you’ll be establishing a healthy credit history.
- Don’t apply for just any card. It’s a good idea to be selective about which cards you apply for. There’s more to credit cards than rewards programs, after all. Take the time to do some comparison shopping, read up on each lender’s terms and conditions, and check out what the lender’s current and former customers have to say. Applying for a credit card is a big decision. Take your time and do your research.
Venturing into the world of credit card use can be both exciting and overwhelming, but the more you know the better you’ll do. If you need additional information or advice about how to get started, the team here at American Credit Foundation is always available. Contact us today!