Getting your first credit card
Good evening Penny Pinchers! Hope you all had a great weekend! We are going to start off with how to use a credit card and the planning that goes into getting one.
Banks have made it easier to plan for the most important step which is making sure you have an appropriate credit score. Unless you have a good credit score, you will be rejected if you put in an application, which is why aiming for the appropriate credit card is important. There are some credit cards which are for cash back, some which accumulate points/miles and some which are for basic usage.
There are so many to pick from, that it can be overwhelming, which is why using a site like credit karma can be a good idea. This website will advise you on your credit score and which credit cards you are likely to get approved with. Now if your credit score is really poor (either you were in financial trouble before, or you are new to the country), most likely you won’t get a card with many perks. That’s ok, and its important to understand this I know that this is for the long haul.
The first thing to do is build credit. Pay your bills on time and in full. Let the score climb up so that when you can, you can apply for a credit card with Cashback. Track your spending, and what categories you are generally spending on as this is something I plan for when applying for credit cards. Also see if you can become an authorized user to build up that credit card score.
Make sure to set goals as well. If you know you will have big purchases for exams, professional memberships then you can apply for a credit card with a sign on bonus just before that payment, so you can get the benefits of the Cashback or points/miles. For example when I had to pay for a society membership which was $800, I opened up my Discover credit card (which is a good opening credit card to have with a low credit score).
It is imperative to pay off the balance off in full, as if you don’t and you keep an unpaid balance, you will have to pay interest. Whilst most basic credit cards usually entice you with low interest rates (that’s why they are easier to apply for), others like most travel-rewards credit cards can carry high interest rates which defeats the purpose of the perks you may get. Most importantly, your score will go down, hurting your ability to open cards or obtain a mortgage or other loan when you need it in the future.
Conclusion
Getting it right the first time is important once you start getting into the credit card game as I like to call it. Not overshooting is important the first time. The 3 most important rules are pay off the balance in full, never miss a payment and plan to get any sign on bonus.
In the next post coming up on credit cards, we will discuss choosing credit cards based on categories of bonuses in the form of Cashback and points/miles and examples of some credit cards.
Till next time Penny Pinchers!
Featured photo by Webaroo.com.au on Unsplash