Credit cards can be a helpful tool for establishing credit and paying for unforeseen bills, but they do necessitate careful card usage. Landlords, utility companies, and other financial organizations all heavily weigh a person’s credit history when making decisions.
An applicant’s reputation may suffer if they have a low credit score or a lot of debt, which could lead to a rejection.
It’s crucial to understand how to control your spending as a first-time credit card holder, what to think about before applying, and which credit card can be the best choice for you.
Should You Get a Credit Card?
Obtaining your first credit card might be exciting since it gives you the chance to start improving your credit and enhances your purchasing power. Be sure you are familiar with how credit cards operate and how you want to use credit before you apply for one. These first actions can maintain you in a position of financial success and prevent you from utilizing credit excessively.
Why using a credit card could be a wise choice for you
Credit cards offer cardholders a number of advantages, including the secure purchase of regular or expensive purchases. Here are a few advantages a credit card gives if you’re unsure whether you should or shouldn’t apply for one.
1. REWARDS AND INCENTIVES
Several credit cards provide users with additional benefits or incentives, like cash back, points, shopping and student discounts, frequent flyer miles, and even access to airport lounges or prizes at partner retailers. Long-term savings and benefits depending on your preferences and interests are possible with these kinds of rewards.
2. COMFORT AND EASE OF USE
The majority of companies accept credit cards as payment. This means that your credit card will probably be accepted anywhere you are in the world, especially if it is issued by a reputable credit card provider like Visa or Mastercard. Also, using a credit card reduces the need to carry cash.
3. BUIL dYOUR CREDIT
One of the most common ways to establish credit is using a credit card. You may quickly increase your credit score by using credit cards responsibly, which will provide you access to better financial options. Spend only what you can afford to pay back in full the next month, make all of your payments on time, and keep your card balance at zero as a general guideline to improve your credit.
4. MAINTAIN ACCOUNT SECURITY
You can quickly secure your account by making a fraudulent purchase claim in the terrible event that your credit card information is stolen or your online identity is compromised and your credit card is used. You need to work with your credit card company to reverse the charges as soon as you can after reporting the card or card information as stolen. Some credit card providers also provide email or text notifications that will let you know whenever large or suspicious purchases are made. This makes it possible to prohibit further fraudulent expenses by closing or suspending your account and ensuring that fraudulent purchases are identified as soon as they are made.
(5) MONITOR YOUR SPENDING
Using your account statement, your bank’s web portal, or a mobile application, you may easily keep track of your credit card spending. You can make sure you’re staying within your budget and on track to achieving your financial objectives by keeping an eye on your expenditures. If your spending exceeds the bounds of your budget, it might also assist you change direction. You might even be able to generate reports from some issuers to discover which categories you spent the most money on over a specific time frame.
Why You Shouldn’t Get a Credit Card
Despite all the advantages a credit card could offer, it’s critical to assess whether it is the best option for your financial situation. If you’re currently living paycheck to paycheck, are a heavy spender, routinely go over budget, or are in the process of paying off debt, getting a credit card might not be the best move for you.
The following list of factors will assist you in deciding whether a credit card is the right choice for you.
1. GAINED INTEREST
Use a debit card or cash instead if you frequently struggle to pay off your bill in full each month. Very high credit card interest rates are possible; in 2021, the average was 17.13%.
2. Tests your ability to control your spending.
While having a credit card can make it easier to keep track of your spending, it can also make it simpler to disregard it. It’s simple to overlook how little fees can add up, especially if you’re practically living off borrowed money. It can also be tempting to utilize it for significant purchases, which could result in protracted repayment periods and interest charges.
3. PENALTIES FOR LATE PAYMENT
You could be better off waiting to get a credit card until you’re in a better financial situation if you’re unsure you can make the payments. In some cases, credit cards will charge the highest interest rate in order to punish you for making late payments.
4. DIVERSE FEES
When you acquire a new credit card, it’s crucial to carefully read the fine print. You should be aware of the many expenses associated with your account, including your annual fees, annual percentage rate (APR), late payment fees, and balance transfer fees. If you aren’t aware of these possible fees, you can receive a larger bill than you anticipated at the conclusion of your billing cycle or discover annual expenses that you might not have planned for.
5. IT May cause you to incur more debt.
If you currently have debt, whether it be through loans, unanticipated costs, or continuing to catch up after a financial setback, having a credit card could increase your debt if you’re not careful. According to a MoneyGeek study, managing credit card debt is the biggest source of financial stress for 18% of Americans. You might want to delay applying for a credit card if you believe you aren’t in the ideal position to manage credit card spending.
5 Factors to Consider Before Getting Your First Card
You should think about a lot of things before applying for your first credit card, such as your spending patterns, present credit history, and what you can afford. For all, the ideal credit card should facilitate the development of your credit profile rather than make it more challenging for you to raise your rating. Below are five considerations to consider before applying for your first card.
1. Your eligibility
There are many different credit cards on the market, but bear in mind that as a new cardholder, you might not be eligible for all of them. Some cards have requirements, such as being a high-earner, having held the card for a long time, or maintaining an exceptional credit score.
2. Your financial capacity
Prior to requesting a credit card, take into account your financial situation. Do you find it difficult to pay your payments each month? Do you currently have any debt to pay off? If this is the case, you might postpone getting a credit card until your finances are in better shape.
3. Your spending patterns
Even if your financial situation is stable, knowing your spending patterns will help you decide if a credit card is the best option for you. Consider using your debit card exclusively until you’ve improved your money management skills and prevented going into debt if you have a tendency to shop on the spur of the moment or go beyond with your monthly budget.
4. Your requirements and available choices
Consider your needs for credit. Do you yearn for the security of having extra money set up for unplanned expenses? Do you intend to buy something expensive? Looking for a long-term finance solution? If you find that you need additional funding for significant purchases, a loan with a lower interest rate than a credit card might be advantageous.
5. Your credit history at the moment
If you have little to no credit history or less-than-perfect credit, you can be rejected for an unsecured credit card. Before applying, you can get a free copy of your credit report and check it out. By doing so, you can challenge any mistakes and raise your chances of approval. A secured credit card, which is a credit card that you fund with money and use to build credit, may be a smart option to help improve your credit history.
How to Pick the Perfect Credit Card
What credit card is best for you will depend on your spending patterns and intended use. For instance, having a credit card might not be the greatest choice if you have trouble paying your payments on a monthly basis.
If your financial status is sound, consider how you plan to use your card and your current circumstances. Do you only wish to establish credit? Can you afford annual fees and do you want rewards for spending? Student credit cards might be the greatest choice if you’re a student. Otherwise, consider the alternative card types you have. This step will assist in determining the best type of card for your requirements.
Once you’ve decided on the type of card you want, evaluate the offerings from various issuers. Examine the interest rate, costs, and benefits offered, as well as the prerequisites. For instance, if you want a credit card with cash back, consider the benefits and how frequently you’ll use them. You can receive the best rates and perks that fit your spending habits by comparing multiple cards.
Important Credit Cards Tips You Should Know
Understanding how to use and maintain credit cards is equally vital as understanding that they are a step towards establishing a better financial foundation and future. The following advice should be kept in mind to maximize the benefits and minimize spending.
- Download the mobile app for your card. You can track your spending and your current balance using the mobile applications that come with the majority of credit cards. Some apps even provide additional bonuses or point out places to find bargains. Be sure to download the corresponding app for your card.
- Plan your own spending plan. Avoid exceeding the credit limit because this is your first credit card. To make sure you’re aware of your balances and spending patterns, create a budget for yourself and monitor your spending using the mobile app for your credit card.
- Benefit from incentives and savings. If you have a rewards card, you may be able to reduce your regular spending. If any further savings are available, take advantage of them, especially if you intend to use your credit card for regular purchases.
- Be mindful of the costs. Pay attention to the costs associated with using a credit card. Fees for late payments, exceeding credit limits, and international transactions may be included. Make cautious not to place yourself in a position where you have to pay expensive fees.
- Keep your card details secure. When purchasing online, be sure to safeguard your card information by verifying the retailer, using third-party applications like PayPal, Apple Pay, or Android Pay, and avoiding unprotected Wi-Fi networks.
- Understand what to do if fraud occurs. If you notice fraudulent activity, call your credit card company right away and change your passwords the same day. Also, you should keep a closer eye on your credit reports and statement later so you may challenge and report any additional charges.