Credit cards are one of the most popular forms of payment in the US today. For a lot of youngsters, getting their first credit card is often seen as a rite of passage.
However, without the proper foresight and diligence, it is easy to rack up some serious debt. This is because credit cards are effectively a form of short-term loan, and with every purchase, interest is added to your total.
This is why as a first-time user, you really need to have done some research into credit cards so that you are aware of what constitutes a good deal to avoid getting taken advantage of by unscrupulous providers. Read on for more information.
1. The Application Process
The first step to procuring a credit card is to go through the application process. The application itself can vary between providers, but, in general, they will ask you for a number of personal details like your name, age, address, social security number, and income.
After that, you need to wait to see if you have been approved. Since credit cards are essentially a form of loan, the provider needs to assess your application to decide whether they deem you a worthwhile applicant.
This means that they need to work out whether or not they believe you have the means to pay them back. Most banks tend to approve those with a stable income, a decent credit background, and limited debts. That being said, you can find providers who are willing to give those who would traditionally be seen as an un-approvable credit card.
2. Using Your Credit Card
After you have been approved, the provider will likely send you the card out in the mail. Alongside your card, you will receive all the information you need about it, like the credit limit, any limitations on its use, and the pin number.
Once you have all of this information, you are free to use the card as you see fit, obviously bearing in mind that you will not be able to surpass the limit. If you do reach the limit, then you will need to pay off your balance a little in order to use the card again to make additional purposes.
During your usage of the card, you will receive a credit card statement around once a month. The statement details the card’s usage, listing all of the purchases that it has been used for as well as your remaining balance.
When you receive the statement, you really need to go over it properly and in-depth to ensure that you were the one to make the purchases. The statement will also tell you when your bill is expected and the minimum amount that they will accept from you.
After you have received your statement and looked over it to ensure that it is accurate, you can think about your repayments. As mentioned above, the statement will tell you the minimum contribution that your provider will accept towards your debt.
If you can, you should always pay more because it minimizes the amount of interest you will owe as well as shortens your repayment term. Paying your credit card off promptly also helps to improve your credit score.
In fact, Tally, who has a lot of debt management tools and advice, also has a really informative blog post on when the best time to pay your credit card is, so be sure to look them up.
3. Understanding Your Statement
As explained above, you will receive a statement from your credit card provider once a month, and you need to know how to read the statement in order to ascertain whether or not it is yours and whether it is correct.
After you have made a repayment to your provider, you need to check on the next statement that the payment has been correctly credited to your account. When choosing a credit card provider, you always need to read the small print.
If you don’t, you might find that your credit card statements include all sorts of fees that hike up the amount you owe and make it more difficult to pay off. You should also pay attention to your interest rate to ensure that it is holding steady.
4. Keeping Your Credit Cards Safe
Unfortunately, credit card fraud is pretty common, and it is incredibly important that you take all the necessary steps to protect yourself and your money. First and foremost, it is imperative that you keep all of your personal details private.
You should never give out any of your personal details or card details to someone unless you can verify their identity, especially over the phone or online. If you do get any phone calls or emails claiming to be from your credit card provider, you should always do your best to verify their validity before giving out any information.
Once you have ready your statements, you should shred or otherwise destroy your financial documents. Never throw them away as is; if you want to keep them, you are welcome to, but most people tend to read them and discard them. Discarding your statements with all of your information on leads to identity theft which is why you should always destroy them before throwing them in the trash.
Most of the time, you will be able to set up your own pin, which means you can choose it. You should think carefully about what you choose because choosing something too simple and obvious will make it easier for others to access your card. The same should go for all of your passwords.
Getting your first credit card can be daunting, but it is worthwhile. Using a credit card responsibly is the fastest and easiest way to build up your credit and prove to the banks that you are a reliable investment which can help a lot when it comes to securing loans or other lines of credit in the future.
However, credit card debt can spiral beyond your control, so it is important that you use the card responsibly. Just because you have a credit limit doesn’t mean that you have to reach it; paying for things that you ultimately can’t afford with your credit card that then adds interest simply puts those products even more beyond what you can afford. If you can, try to stick to smaller purchases that you will be able to pay back within a few paychecks.