There are many reasons you may want to get a credit card. A credit card can provide extra funds when you’re in a pinch and offer rewards. You can even use a credit card for improving your credit score.
However, getting a credit card can also be risky. You are opening yourself up to debt. If managed properly, credit cards create opportunity, but if mismanaged they can get you into serious trouble.
Fortunately, as long as you know what you are doing when you get your credit card and take care to manage it well, you should be able to benefit from the perks without falling victim to the risks.
Here are some key things to know when getting a credit card, that will help you use it responsibly.
Identify why you want a credit card
Before you start searching for different options and applying to providers, you should identify the primary reason you want a credit card. This is because your primary purpose will determine how you go about choosing a credit card.
Let’s say you want a credit card for nothing more than to improve your credit score. In this case, you should look for a credit card with a fair limit and straightforward terms. To improve your credit score, you will simply need to buy something with the card and pay back the minimum monthly installments.
However, if you want a credit card because you are struggling to make ends meet, you will need to approach your search very differently. You will need a credit card that provides the amount of money you need without a crazy interest rate. You will also need to pay careful attention to the minimum monthly payments to ensure you are not simply getting yourself into a stickier situation.
Many people choose to get credit cards because of the rewards and bonuses on offer. If this is your intention, you will need to look for credit cards with the kind of rewards you want and with rules that are fairly simple to follow.
There are many other reasons to get a credit card. You may have more than one reason. Identify what is most important and then find an option that serves all your needs.
Check your credit score
Keep track of your credit score. Your credit score is going to determine what credit cards you are eligible for. If your credit score is particularly low, you will struggle to get a credit card with a reasonable interest rate. If, however, your credit score is particularly high, you will be able to get almost any credit card you like the sound of, with low interest rates and favorable terms.
For those who do not yet have a credit score, an entry-level credit card will help you build one from scratch. Credit cards are one of the few sources of credit which are provided to people without credit scores, and for this reason, are widely used by people starting out on their financial life journey.
Compare your options
Your credit score will rule out certain credit cards, as will your particular needs. This will leave you with a number of credit cards to choose from. Compare the various providers, looking into their legitimacy and customer reviews. Rule out any providers who seem to take advantage of their customers.
The remaining options may each have their pros and cons. Find the credit card that comes closest to suit all your needs. Ideally, this credit card should come with low interest rates and high reward possibilities, but this will depend on your credit score as well as the kind of money you need.
Apply for your credit card
Only when you have come to a concrete decision should you actually start applying for your credit card. In theory, you could apply for a number of options and see which ones you get approved for. However, being rejected by a credit card provider can negatively impact your credit score. Apply only for a credit card you know you both want and are able to get.
Today, credit card applications can take mere minutes to be approved. If you are getting a credit card from a bank with whom you already have accounts, you may not even have to provide all that many details. Once you have hit send on your application, you are almost there. The bank or credit provider will send you a quote on a credit limit and interest rate which you can approve online.
This is just the start of your journey. Taking care to manage your credit card habits is a continual process. But if you follow the above steps, you will be starting in the ideal position.