As a newbie to the credit card world and you’re about to choose your first credit card, there is certain information you should be aware of in other to other to choose the right type of card.
There are necessary steps you need to take to ensure that you don’t make unnecessary mistakes when choosing and using your credit cards whether it is for the first time or subsequent times.
Let’s take a look at important tips to apply when choosing your first credit card. These tips can also be helpful during subsequent applications for a new card.
Whether or not you are a newbie to using credit cards or you are conversant with using credit cards there is certain information you should be aware of when using cards in order not to experience unnecessary problems.
Important Tips to Apply When You Choose Your First Credit Card
1. Make your Research about the Credit Card Type
Doing your research cannot be overemphasized when choosing your first card. You need to be well informed about the policies and terms and conditions of service adhered to by the banks and financial institutions you are affiliated with. And the requirements you are to fulfill in the process of acquiring and using those credit cards.
2. You Should have an Income Source
Those that issue credit cards usually require that you present a stable source of income when you are to apply for your first credit card. Because being able to pay back your balance provides the guarantee that you will be approved when you apply for your credit card.
Lenders need to be assured that you will pay them back thereby gaining their trust in the process when you can repay. Central law requires that grown-ups under the age of 21 should have sources of income before they can be approved to wield credit cards.
3. Choose Smartly
When choosing your first credit card, there are lots of credit cards available to choose from. Pay attention to the pain points you struggle with when selecting a card. If you are worried about being able to pay up your bills on time then selecting a card with a low yearly percentage rate would be the best thing to do.
Also, secured cards are always available if you find it difficult to curtail your spending. There are different cards suited for different types of people. Don’t go choosing a particular card because the appearance is appealing it gives the most rewards.
4. Secured Credit Card is a Great Option for First-time Applicants
Using a secured credit card when choosing your first credit card time is advisable for some reasons.
- As long as you pay responsibly your score goes up enabling you to switch to an unsecured card
- A secured credit card helps you save funds while building your credit score same time.
Harry Stone, a credit expert who writes for speaking in credit says that a secured card is the best way to go about getting your card when doing it for the first time.
5. Avoid Cards with the Perfect Credit
Being denied credit does not affect your credit score. But your score is still affected by lenders looking into your credit history if you apply for your first card and it is out of reach, you will end up stuck in a loop of hard inquiries and rejections. Most card lenders will not even give you an unsecured card if you have no history.
6. Compare Rates, Fees, and Benefits
You have made your research and chosen the type of credit card you want to go for as your first card. The next thing is to compare the rates, fees, and benefits and figure out the one that best suits your need.
Some cards have annual fees while some have monthly fees. In addition to that, some credit cards charge fees for certain actions like foreign transactions and making late payments if you don’t make the minimum payment before the due date. As this is your first card, you have to consider a card with a low credit fee.
Credit card interest rates are displayed as Annual Percentage Rates (APR). The higher the APR, the higher the interest rate you pay when you carry a balance over to the next month. You can avoid paying interest with most cards if you can pay off your balance in full each month.
On rewards, some cards offer new cardholders who meet the requirements an intro bonus, such as an extra $100 cashback after making $500 worth of purchases. These promotions aren’t common on secured and student cards. But you can find cards with ongoing rewards, such as cashback on your purchases
7. Use loans to your advantage
A positive loan history can show card issuers that you are low risk and you are capable of paying pack in time. Loans count as credit so if you pay them pack responsibly that positive information will remain in your credit card for 10years after being closed.
Also, a negative loan history will not stay on your report for seven years. A loan that is closed would not help generate a credit score.
So when choosing your first card, having a positive loan history can enable you to secure good credit card terms and lower fees.
8. Become an Authorized User
A great way to get your first card while limiting the responsibility and pressure is by becoming an authorized user on another person’s card. Alphawallstreet recommends this as one of the ways to build your credit score.
This way you can have a credit score without actually having a credit card. If you want your card to be an authorized user, you can meet up with your family and friends with a good credit history and ask to be an authorized user on their credit card.
In this case, he or she is the primary cardholder and you’re an authorized user in this credit card account.
The good thing about being an authorized user is that the on-time payments on the credit account are reported to the three credit bureaus which increase your credit score and that of the primary cardholder. But remember if the person whose card you are becoming an authorized user falls behind on payments your credit will be impacted as well.
How to Use Your First Credit Card Responsibly
Once you have gotten your first card, you can either use it to increase your credit score or ruin it. There are practices that can help you increase your credit score while avoiding fees and interest rates.
These will guide you to build your credit score as long as your payment history is reported to the 3 credit bureaus:
1. Purchase what you can afford to payback conveniently
We know the excitement that comes with getting your first card approved. You can’t wait to use your cards to make payments for groceries and all that. But remember, getting your first card is like the start of your financial journey.
Only purchase what you can afford to pay back conveniently to avoid having a bad credit history. Your credit history is the most influential factor that affects your credit score.
It contributes 35% of your credit score. So you have to use your card to purchase what you can conveniently pay back in due time to avoid having a bad credit history.
2. Always make at least your minimum payment
Ensure to make as many payments to cover your bills each month. At least pay more than your minimum payment on or before the due date to avoid paying for late fees. If you’re 30 days past the due date, the credit card issuer may report your late payment to the credit bureaus and this can hurt your credit score.
3. Always keep your credit utilization ratio low
The credit utilization ratio is the percentage of your credit limit that is being used by you. Credit utilization is the second most influential factor that affects your credit score. Alphawallstreet recommends keeping your credit utilization below 30% always. The lower your credit utilization ratio, the better
4. Track annual fees
If you have a card that charges an annual fee, mark your calendar for when the annual fee will be due so you can prepare for its impact on your finances.
Ultimately, choosing your first credit card is a big decision but also an important one. Remember to take time and research and find which option is best for you when opening your first card and every card that follows.
Also getting your first credit card is just like the beginning of your financial journey, you should endeavor to manage your card responsibly and increase your credit score. So that you can secure better terms and lower fees from card companies in the future.