Four Key Things to Know Before Applying for Your First Credit Card
At first glance, a credit card might seem like just another bit of extra money to help you make purchases; however, it can be a lot more than simply that. When you use one responsibly, your first credit card can help you to build up a strong credit history, which will allow you to have more financial freedom when it comes to borrowing money. A good credit history will go in your favour, whether you’re taking out a business loan, applying for a mortgage to buy a house of your own, or simply want to get the latest smartphone on a contract.
Here are some of the main things that you should know before you apply for your first credit card.
#1. What Is a Credit Card?
If you’ve never had a credit card before, or this is your first time borrowing money from the bank, then you might not be fully sure about how one works. A credit card looks just like your regular debit card, however, instead of having money deposited into your account from your wages or other sources, you’re essentially taking on a short term loan; the card will come pre-loaded with a pre-agreed amount of money, which you’ll then be able to spend on the basis that you’ll make a minimum repayment each month.
#2. Benefits of Getting a Credit Card:
You might be wondering how you could benefit from getting your first credit card, other than the fact that you’ll have more available funds for spending. The good news is that there are several benefits to having a credit card in your name, if you use it responsibly. Keeping your credit balance under around 50% of the total limit and ensuring that you make timely repayments each month will not only put you in good stead with your bank or lender; it’ll also have a positive effect on your credit rating and demonstrate to potential lenders that you’re a low risk, which will increase your chance of being accepted for other financial products in the future.
#3. Credit Card Rewards:
Another benefit of having a credit card is that you can find many card options that come with a range of rewards available. For example, some credit cards allow you to collect air-miles each time that you spend, which can then be used towards holidays abroad and other trips in the future. Or, you can find credit cards that will allow you to build loyalty points for your favourite supermarkets, which can then be redeemed for groceries and other items, helping you to save money in the long run.
#4. Credit Card Fees:
Lastly, it’s important to be aware of credit card fees before you sign up for your first one. Along with the Annual Percentage Rate (APR) of interest on the card, some cards may charge annual fees, particularly secured cards, which are backed by a cash deposit. Bear in mind that there will likely be a range of other fees that you may need to pay, such as fees for missing payments, going over your credit limit, making a balance transfer, or using your credit card abroad.
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