Are you interested in applying for your first credit card but need help figuring out where to start? The credit card industry can be complicated to understand initially, but that’s why we’re here. If you’re ready to apply for your first credit card, keep reading to learn what you need to know before applying for a card.
How Does Credit Work?
Credit allows you to purchase something immediately while paying for it later. A credit card comes with a contract that you agree to pay for what you spend and failing to do so can bring heavy consequences.
There are many different types of credit cards, but we’re only going to discuss a few today.
Cash Back Credit Cards
Cash back credit cards allow you to earn credit or cash back when you make a purchase. Some cards offer a flat rate of rewards, while others offer bonus rewards in categories like travel or dining.
Travel Credit Cards
As you may have guessed, travel credit cards offer rewards that are focused on travel. Some cards offer travel credits, and others provide programs to customers, such as a frequent flyer program or a hotel loyalty program.
Secured Credit Cards
This type of credit card requires customers to put down a cash deposit to secure a line of credit. Typically, these cards are great for those trying to repair their credit or those who don’t have any credit.
Student Credit Cards
These cards are for college students and typically carry rewards or bonuses that appeal to the average college student.
Know Your Credit History
Credit card companies will look at your credit score before they offer you a card because a good credit score shows trustworthiness. If you have a low score, you might be better off applying for a secured credit card versus an unsecured credit card.
According to Forbes, the worst thing you can do is exaggerate or lie on a credit application. Because a credit card contract is a legally binding document, lying or exaggerating is an act of fraud and can lead to criminal charges.
Pay Attention to the Rates and Fees
Federal law states that credit card companies must publicly disclose terms such as interest rates and fees. Pay attention to the following terms so you can find a credit card that suits your needs:
The fee that is charged once a year
APR (annual percentage rate)
The APR is the interest rate that gets paid on balances from month to month. These rates can change depending on what type of purchase you make.
Foreign Transaction Fees
These fees are charged when making purchases outside of the country you reside in.
You will be charged a late fee if you pay late or don’t pay the minimum amount due.
Pay More Than the Minimum
On your credit card statement, you will see an area that says “minimum payment due.” You will have to pay this amount to keep your card in good standing. It’s advised that you pay more than the minimum amount because doing so will cause you to pay more money in the long run. The minimum amount due typically consists of the fees you owe for the previous month and doesn’t cover the money you spent.
Credit cards can make a difference in your life if used responsibly. If you’re ready to take the next step into financial freedom, take these tips and apply for a brand new credit card today. And remember, if you don’t get approved at first, you can always try a secured card to jumpstart your credit journey.