If you're new to the world of credit cards, it can seem like an overwhelming undertaking. Where do you begin?
There's a lot to the process, so we've condensed the most important things to know into a guide that's easy to understand. Once you get a hold of the different options the credit card universe has to offer, you'll be on your way to getting one in no time!
Your Credit Score :
The first step in finding a credit card is checking your credit score.
The higher the number, the better the credit card you’ll be qualified for.
If your number is low, however, it doesn’t mean you have to bypass credit cards altogether —you’ll just need to look for ones geared towards building a credit score. Doing this will boost your score in the long run.
Card Features & What to Look For :
Every credit card comes with its own perks and drawbacks. Some provide lots of rewards to customers but come with a high interest rate. Others have a very low interest rate, but might come with a hefty annual fee. In order to find the card that’s right for you, you need a basic understanding of the different credit card features.
Not all credit cards come with a yearly fee, but for those who don’t mind the extra charge, it might be worth it. Credit cards with an annual fee typically have more perks than those without. For example, you might pay an annual fee for a card that comes with free entry to airport lounges or lowered rates on checked airplane luggage.
This fee also indicates higher rewards as you use your card over time. It’s also a way to get around certain obstacles that might impact your ability to qualify for a credit card, like a really low credit score. If you’re looking for something simple and cost-friendly, however, you might consider avoiding cards with an annual fee.
It’s not just the yearly fee you have to keep an eye out for, either. When browsing credit cards, look into any balance transfer fees, foreign transaction fees, cash advance fees, or late fees. These are ways the credit card company might bill you extra to move debt, purchase things abroad, take out cash, or if you miss a payment.
Another crucial aspect of choosing the right credit card is understanding the interest rate associated with it. The interest rate is a small percentage of what you owe that will be added to your grand total as time passes. When it’s small, it doesn’t impact you too much, but if it’s steep, you might find yourself paying much more than expected.
In the beginning, a company might offer you an introductory rate of 0%. Sounds like a good deal, right? Just make sure you check the ongoing rate, as this is what will kick in once the introductory period is over. For the lowest interest rates, you will likely want to visit a credit union. Keep that credit score up, too, because the higher your score, the lower your interest rates.
Many credit cards come with rewards. Think of these as incentives to use your credit card. They can come in the form of cash-back refunds, redeemable points, added perks, etc. The rewards vary widely among credit cards, so you’ll have to assess what makes the most sense for you. Need to save some more cold hard cash? Look into rewards with cash-back systems. Spend a lot of time traveling? There are cards that offer a certain number of airline miles for every dollar you spend.
If you’re serious about using a credit card on a regular basis, consider getting one with a sign-up bonus. This is a promotion that offers you a big reward (like a large number of points or miles) for choosing to do business with them, and for using their card a certain number of times within the introductory period. It’s something not everyone knows to look for but can pay off in a big way.
Perks are similar to rewards, but you don’t have to use the card to access them. You get them just for signing up in the first place! Many credit cards with high annual fees ($100 and up) are worth it to their customers because the perks are worth more than the yearly fee. There are many credit cards that cater to business travelers, so their perks are airport and hotel-related. Others offer protection on your purchases in case of damage or theft. Even others have special services to monitor and control your credit score.
What If You Don’t Have Good Credit?
If your credit score is hurting, it can seem like a daunting task to get it up to shape. The good news is that there are credit cards made specifically for people like you. You’ll want a credit card that offers credit bureau reporting. This means they report your on-time payments to the bureaus in charge of determining your credit score. You should also look for upgrade potential. These are cards with more rewards the longer you’re able to pay your bill on time.
In some cases, however, you’ll have to secure a card with a security deposit. This is a sum of money, typically a couple hundred dollars, that serves as a kind of security blanket for the credit card company. If you keep up with payments, though, you’ll be able to get that money back.
All in all, getting a credit card doesn’t have to be a stressful experience. By putting in the effort to do some research beforehand, you’ll go into it knowing what you need and exactly what to look for. Although it may seem like there are too many options to choose from, this diversity is actually a good thing — it means that no matter your circumstances, you’ll be able to find something that works for you.