Credit cards can provide convenience when shopping.
Bringing this piece of plastic instead of piles of cash can keep you off the radar from a thief’s prying eye. But while credit cards can positively impact your spending habits, you should think long and hard before getting one. A credit card requires responsibility, and failure to handle it properly can lead to debt.
Before you start calling a particular bank and inquiring about their starter credit cards, it’s best if you look at several other factors first. Getting a credit card without weighing the pros and cons of this decision can adversely affect your financial health and quality of life.
Make sure to consider the following things when choosing your first credit card:
1. Interest Rates
While you can make big purchases simply by swiping your credit card, this privilege isn’t free. Paying using your credit card is like borrowing money from the bank, and you’ll have to pay the amount with an added interest rate.
Credit cards will usually offer zero interest rates to entice people to open an account with them.
These offers can be very tempting, but it’s always important to do some research on the interest rate once this promotion ends.
Getting a credit card with zero interest rates and then finding out that you’ll have to pay around a 15 to 20 percent interest rate after a month can be very stressful. When this happens, you’ll be forced to compromise your budget or close your credit cards (which can adversely affect your credit score).
Make sure to shop around and look for credit cards that offer low-interest rates for the long term. The lower the interest rate is, the easier it’ll be for you to make timely payments for your credit cards. Credit cards with low-interest rates can also help you save money in the long run.
Not everyone likes the idea of owning and using a credit card, but more and more companies are changing this mindset by offering rewards to its users. The more often you use your credit card, the better rewards you can enjoy.
If getting rewards is one of the reasons why you’re applying for a credit card in the first place, take the time to scout for several credit card companies and compare all of their rewards. If possible, choose a credit card that offers rewards apt to your lifestyle or interests.
Most credit card companies will offer travel rewards and cashback benefits. Every time you use your credit card, you will earn points that allow you to save money on travel-related expenses such as car rentals, accommodations, and flights. Cashback, on the other hand, returns a certain percentage of your spending. This reward is usually given to you annually or quarterly.
Choosing a credit card that offers rewards is an excellent way for you to make the most out of your spending. This is especially true if you want to use your credit card for your everyday spending.
3. Annual Fees
If you have been receiving credit card offers in the past, you might have heard of how you’re required to pay for an annual fee. Credit card companies often give rewards to users to compensate for the annual fees they pay regularly.
However, not all credit cards actually require annual fees. In fact, there are several credit card companies that don’t require their users to pay annual fees but still give out rewards.
Credit cards that don’t come with annual fees are the best types of credit cards. Aside from saving you money, these types of credit cards also allow you to enjoy additional perks for free.
If you want to find credit cards without any annual fees, do some research or ask your current bank if they have one. You can also inquire from your credit union or utilize the World Wide Web to know more.
Owning a credit card allows you to enjoy a lot of benefits, so expect that the credit card companies will also require several responsibilities from you. Aside from requiring you to pay for several fees, credit card companies also expect you to follow a payment schedule.
When choosing your first credit card, don’t forget to know about the penalties associated with your card. Being well-informed about these penalties is a requirement if you want to boost your finances and use your credit card for the longest time possible.
After you’ve narrowed down your options, ask the credit card company about their penalties and what situations will require you to pay for these penalties. Some companies might raise your interest rates the moment you make late payments or when you go beyond your card balance.
As a future credit card user, you should fully understand how your credit card works so you can avoid paying for any penalties and suffer from high interest rates. If the credit card you’re eyeing to use has high penalties, consider looking for other options.
5. Income Requirement
Your income is a determining factor in the type of credit card you can qualify for. More often than not, credit cards that have low-interest rates and robust rewards require higher income. The money you earn regularly can help companies identify whether or not you have the financial capability to afford and keep a credit card.
Depending on your income, you might only have limited options when it comes to the credit card you qualify for. This is one of the reasons why you should always research several credit card companies and know their income requirements.
Regardless of how tempting it can be, never go out of your way to apply for a credit card that is beyond your income. Doing this might allow you to enjoy low interest rates and great rewards, but this can impact your finances and credit score in a lot of ways.
Get a credit card that meets your income range and make sure to make timely payments to boost your credit score. Aside from earning a higher income, a good credit score can qualify you to apply for credit cards with better deals in the future.
Research, Research, And Research
Choosing your first credit card is a crucial decision as it can make or break your financial health in the long run—it can either boost your purchasing power or become the reason for your financial stress.
Make sure to research extensively before choosing your first credit card. The amount of time and effort you put into this task can go a long way for you to end up with a credit card that matches your needs.