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  • Dennis#MD

    Things to Consider Before Getting your First Credit Card

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    A credit card can be a great tool for your personal finance, but only if it used responsibly. When deciding to get your first credit card, you need to make sure you are financially responsible enough to get a credit card.

    Getting a credit card and using it irresponsibly will actually hurt you more than not having a card at all.

    One of the main benefits of getting your first credit card is the ability it has to boost your credit score, or even develop a credit score for you if you do not have one yet.

    Without a credit score, you will not be able to get a mortgage, or a car loan–your credit score can affect you more than you think.  If you are getting your first credit card, chances are you do not have a credit score yet. Here are some things you should consider before you get your first credit card:

    Pay Attention to the Interest Rate

    When looking for your first credit card it is important to know what things you should consider and what to look out for. One of the most important things you need to consider when comparing offers is the interest rate you will be charged.

    It is important to shop around and find the lowest interest rate. Ideally, you will pay off the credit card balance in full every month, but if you have to carry a balance from one month to the next, you will be grateful you found the best possible interest rate.

    Are There Rewards?

    Some credit cards also offer other rewards and incentives–some lenders may offer cash back rewards, or a small percentage of each purchase that you will get back and be able to apply to your statement balance. This is a great way to save money while building your credit score. If you use a traditional debit card, or cash, you will not get any cash back. So, even if it is only a percent or two you will be saving money by using your card.

    Emergency Uses

    Some people are skeptical when it comes to getting a credit card–and that’s totally understandable. You may fear racking up your credit card bills and falling into debt or going bankrupt but having a credit card can be useful if you’re in an emergency situation.

    For example, if you’re hurt on the job, it’s likely you will be eligible for workers compensation. Workers compensation will benefit you in many ways–but it might also land you in court. If you need to hire a workers compensation lawyer, this is when your credit card will come into play.

    What are Secured Credit Cards?

    If you are a new borrower with limited, or no credit at all, you may have a hard time qualifying for a credit card. The alternative option is to get a secured credit card. With a secured card, you will put a down payment on your card, then your spending limit is up to that down payment amount.

    The difference between a secured card and a debit card is the fact that when you make payments on your secured card they will be reported to credit bureaus. By reporting your payments to credit bureaus this will build your credit history.

    Then, you can try to apply for a more traditional credit card after building your credit for a while. If you do not make payments on time though, that will also still be reported and will hurt your credit history.

    What Are the Fees?

    You should be aware of any fees associated with a credit card before you commit to an offer. There are many different fees you could be charged, and all lenders impose their own unique fees.

    Some of the most common fees include late fees, foreign transaction fees , or an annual fee if your annual spending is not over a certain amount set by your particular lender.

    Things like the foreign transaction fee should be taken into careful consideration. If you decide to use your card in a foreign location, the fees could add up quickly. You may even be charged a foreign transaction fee if you make purchases from a business that has its primary location in a foreign country.

    Every card has different foreign transaction fees, and some do not have any foreign transaction fees at all. If you are planning to travel, or there is any chance you would travel and need to use your card, it is important to find a card with minimal or even no foreign transaction fees.

    Use Your Card Wisely

    Getting your first credit card can be a rewarding process, and it can provide many financial benefits, both short and long-term. Before getting your first card, you must carefully assess if you are ready for a credit card–you don’t want to spend half of your life rebuilding your credit score.

    You have to be financially responsible by–making your payments every month and not overcharging what you can afford to spend.

    If used correctly, your first credit card can provide you value for the rest of your life. If you make payments on time and are responsible with your credit card, your lender will most likely increase your available line of credit over time.

    What was once your first card with a small credit limit could become a great asset for you financially as your credit begins to build.

    Getting your first credit card is a big step toward financial independence and is a great idea if you are ready. Just make sure you do not jump into an offer too quick, and find the one best for you.

    Edited by Dennis#MD

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