For some people, applying for a credit card may seem to be a rite of passage as they cross the line between being simply debit cardholders into that new, exciting world of credit card users. This is because owning a credit card is a big responsibility so you need to be prepared first before you can start applying for a credit card.
Here are important things to remember before you embark on getting yourself a credit card:
Be Sure You Have Adequate Income
Having an adequate income is the most important consideration for anyone who wants to apply for a credit card. This is because your purchases using your credit card are actually loans to you by the credit card issuer.
To repay a loan, you need sufficient income so you can pay off your balance every month. This may sound commonsensical but you may be surprised how many people don’t bear this in mind when they apply for and start using their new credit card.
Consider Different Offers First
If this is your first time to apply for your own credit card, it is important to look through different credit card offers before you settle on one. This may mean having to look through the fine print of each one to know what exactly you are agreeing to before you sign that application form.
Some credit card companies may have better offers than others which is why you shouldn’t sign up for the first offer you get. Take time to gauge which ones could be debt traps and which ones are good deals.
Check for Annual Membership Fees
One expense related to credit card applications is the annual membership fee. This may be waived by the credit card issuer for your first year, as a promotional strategy.
For some cards, it can be very expensive to pay for an annual membership fee, especially if you don’t use the credit card often. If you do plan to use your credit card regularly, be sure the annual membership fee will be affordable and worth it, based on the kind of credit card the company will issue to you.
Check the Monthly Interest Rate
One reason that many first-time credit card users get into financial trouble is that they don’t understand how to compute for the monthly interest rate of the credit card they applied for. All they see is the minimum payment required so that they can put off paying for the balance indefinitely.
It is this monthly balance that remains unpaid that the credit card company will start charging you for along with the interest rate. If you just keep paying the minimum per month, that may get you into serious debt. The good news though is that you can start finding financial help right away so that you can get out of the debt trap.
Avoid Trivial Purchases
Another reason some people get trapped in credit card debt is that they don’t differentiate between trivial purchases and necessary purchases. Trivial purchases are those that are not really important or urgent, such as eating out at expensive restaurants. These kinds of transactions may really severely erode your income without you realizing it.
Necessary purchases are those that require a huge outlay of cash for items or services that you really need, such as buying appliances or paying for confinement in a hospital.
It is dangerous to bring around large amounts of cash for those. Hence, it would be convenient to have a credit card to make payments for such necessary uses.
Look For a Credit Card That Will Support Your Credit Score
Generally, if your credit score is still low, or even non-existent yet (because you don’t use credit), you can still get a credit card that serves those with “moderate credit” or even “zero credit”. This kind of status simply means that you are still building your credit history so credit card issuers will take that into account when they consider your application.
Avoid applying for a credit card that is geared towards people who already have a long history of being good payers in credit card transactions because most likely your application will be denied.
If you feel you are responsible enough to start using credit, this might be a good time to apply for your first credit card. Owning a credit card can help you when you are making huge yet necessary purchases for yourself because you won’t need to bring around large sums of money with you.
However, do take time to read the fine print of your credit card application before you start applying for one because there may be stipulations in the agreement that you are not ready for. Once you have read the terms of your use of credit on the application, you can then decide whether to push through with your credit card application or to delay it for some more time.