Beginner Guide: 5 Things You Should Know Before Applying for A Credit Card
We use a credit card for almost every transaction. It is not wrong when we say it is one of the essential tools we need every day. However, for you who plan for applying for a credit card for the first time, you may still know nothing about it. Here, we try to help you with some basics of this payment tool. Here are some of the basic things you must understand about a credit card.
Do Not Apply for the Best Credit Card
When we want to apply for a credit card, mostly we will get a recommendation of the best credit card on the market. Yes, they have various features, the best rate, and many other advantages. However, for the first-timer, instead of choosing the best credit card, you should choose the credit card that you need.
The best credit card may have the best feature. But, mostly, you won’t need it and the price is not suitable for your situation and need. Therefore, find a credit card that only provides specific coverage, such as a student credit card, if you are a student and need a payment tool. Or, choose a secured credit card, if you still want to learn more about how to use it.
Try the Secured Credit Card
Good credit history is one of the requirements to apply for a credit card. However, if you apply for the first time without having any credit history, you can’t get approval. Therefore, the best choice for your first credit card is a secured credit card. What is it?
When you apply for a secured credit card, you have to deposit a specific amount of money. Therefore, people with bad credit or having no credit choose this card because of its easy application process. The amount of money you should pay for a deposit is varying, depending on the company regulation. However, mostly, you have to deposit around $200 to $500 to open a credit card account.
Furthermore, a secured credit card also uses the amount of the deposit you paid as its limit. For example, if your first deposit is $500, that will also become the limit of your credit card. It also means you can easily track down your usage without complicated calculations.
Another good thing about a secured credit card is you can build your credit score by using this card. It is easy to do. Use your credit card under the limit. Then, you also should pay it on time. That will give you a good track record of using your credit score. And, if you make a late payment or didn’t pay at all, the company will take your deposit. Furthermore, you can’t use this credit card anymore.
If you could pay it on time and spend within the limit, or, in short, did a good thing with this credit card, you also can get a benefit. For example, you can upgrade your secured credit card to the standard credit card with more features. Or, you can close the secured credit card and get a good credit score you can use to apply for a standard credit card. Moreover, the company will also refund your first deposit.
You Can Build Your Credit
As we mentioned above, you also can build your credit score through your first credit card. Pay it on time and in full before the due date. Use it within or, even better, below the credit card limit. When you keep doing that, you will get a good credit score. How?
The credit companies that issue your first credit card always send a report to the credit bureaus. It consists of your credit report. If you do it well, as we told you above, you will be able to create a good base for your credit score. Therefore, even if it is your first credit card, you should treat it well. Otherwise, it can affect your credit score. It is even possible that it gives you a bad credit score in the beginning.
Check the Credit Card Rates and Fees
People, who just started to apply for a credit card, didn’t know that they can see the rates and fee of that product before applying. It is one of the federal laws. The company must open this information for anyone who needs it.
Therefore, you also should do this before you choose your very first credit card. You can find it on the application page of the credit card company website. It is called the Schumer box. In this table, you can find different kinds of information about the credit card product, such as:
- Annual fee,
- Annual Percentage Rates (APR),
- Foreign Transaction Fee,
- Late Fee.
By using that information, you will have a solid base to compare the product with others. Now, you can see which product matches your needs and financial capability. Of course, asking the help from an expert is not wrong. You can even get more detailed information from them and the best way to choose the credit card that is perfectly suitable for you.
You Can Avoid Paying the Fee and Interest Rate
The first-timer usually sees that they have an obligation to pay all credit card fees and their interest rate. That’s wrong. The fee you should only pay is the monthly fee according to how much you use it. As for other fees, like annual fee, late fee, foreign transaction fee are avoidable.
For example, you can avoid an annual fee by applying for a secured credit card. The issuer of this card doesn’t use that fee. As for the late fee, it is easy. Do not pay it past the due date. Always pay it in full as well. The foreign transaction fee also can be avoided, if you didn’t use your credit card to pay outside your country.
Another credit card fee that people afraid of is the over-limit fee. Nowadays, the credit card company doesn’t charge it. When you spend more than your limit, you can’t use your credit card anymore. However, if you activate the over-limit protection, you can use your card over its limit, but with extra cost, which is the over-limit fee.
As for the interest rate, it is also avoidable, if you paid your credit card in full every month. The credit card’s grace period will prevent the interest rate from kicking in. It will wait until the next due date. If you can do it regularly, you don’t have to pay the interest rate for as long as you have and use that card.
However, if you don’t pay your credit card in full, the rest of its balance will be carried over. Then, next month, you have an interest rate that you have to pay at the beginning of the month. It will keep accumulating every month if you don’t pay the credit card in full again.
Conclusion We hope, at this point, you already understand some of the basic rules and a few stuff about credit cards. Therefore, you don’t have to hesitate anymore. Choose the product that you like and match your preference and need. Once you applied, you will get more benefits and conveniences that you never experienced before you get a credit card.