Having a new credit card is something that you should be proud of. But at the same time, it requires a lot of adjustments, too. After all, this item will chain you to a series of financial responsibilities, such as keeping up to date with your payments.
Before you get a credit card, you need to make sure that you know the ins and outs. In this way, you can guarantee that it will become an asset to you, not a burden.
Here are some of the things that you have to understand with new credit cards.
The Best Ones Aren’t For Newcomers
If it is your first time getting a new credit card, you have to accept the fact that you will not be able to get the best ones right from the get-go. When we say the “best,” we refer to those cards with a lot of perks, rewards, sign-up bonuses, and generous 0% interest periods. They are only offered to those individuals who have excellent credit scores–those that have a score of 690 and higher. Furthermore, you will also need extensive credit history before you can qualify for them.
There’s a good chance that you have to start with entry-level credit cards. These are the cards that don’t require long credit history. You may opt with the following options: student credit cards, secured credit cards, and credit cards designed for fair credit.
Secured Credit Cards Are Easier To Acquire
If you have difficulties getting your first credit card, you might want to start with a secured option.
Specifically, a secured credit card is tailored for individuals who have no credit history. They are also viable for those people who have damaged credit records. To open a secured credit card, you need to pay a cash deposit. Most of the time, your credit limit depends on the deposit you have made. For instance, if the minimum deposit is $500, then your credit limit is $500, too. Fortunately, secured credit cards will allow you to deposit more money so that you can get higher credit limits.
However, keep in mind that delayed payments will result in losing your deposit. It’s for this very reason that you need to be timely with your payments. Furthermore, prudent spending is crucial to ensure that you will not have a hard time catching up.
First Credit Cards Can Make Or Destroy Your Credit
Keep in mind that getting your first credit card is crucial. If you use it correctly, you will be able to improve your credit. Oppositely, if you are not careful in utilizing the card, you will suffer from harsh consequences.
The thing is, your credit card provider will give your credit report to various credit bureaus. These agencies are the ones that collect and compile credit reports of people. Once they have finally calculated the figures, they will be able to derive your credit score. The information that your credit card issuer will give includes the timeliness of your payments and the utilization rate. Hence, if you have a lot of delayed payments, that will severely affect your score. The same thing is true if you maxed out your credit limit.
The best way to deal with this matter is to ensure that you don’t lag with your payments. It is also crucial that you stay within or below your credit limit every month. Specifically, the ideal utilization should be 30% of your available credit.
Understanding The Rates
You don’t apply for a credit card without understanding the fees and rates. Always remember that federal law is requiring credit card issuers to disclose essential terms that come with a credit card. These things are within the “Schumer Box,” or the table you can find on the online credit card application page.
Usually, the Schumer box has the following information:
- Annual fee – The amount that you are going to be charged every year.
- Annual percentage rate – The APR is the interest rate that you need to pay with your balances every month. Keep in mind that some credit cards have different APRs on particular balances, such as balance transfers, cash advances, and purchases.
- Foreign transaction fees – These are the fees that will be charged to you when you make purchases or transactions outside the country.
- Late fee – This is the amount that you will need to deal with if you pay late or if you didn’t pay the minimum due amount for your credit card.