Credit cards can be extremely helpful to meet certain financial needs. There are plenty of banks that offer them but if you’re unsure on which one to choose then you better read some reviews online. Simply go to Google to look for Wells Fargo, Chase or SoFi reviews to see if their services are matched to your needs. However, before you get your first credit card, you have to ensure that you understand a few parameters and research enough about the credit card you plan to avail. This would help you repay your dues on time and avoid financial distress.
Things to Know Before Applying for a Credit Card
Being a first-time credit card user, there are a few things that you should know before applying for a credit card. Here are 6 points to keep in mind.
1. Understand your Credit History
Your credit score is a very important parameter that directly translates to your creditworthiness. A credit score is essentially a 3-digit number ranging between 300 and 900. It is recommended to have a credit score of 750 or above in order to avail of credit in a hassle-free manner. Your credit score reflects your spending habits, your tendency to be financially responsible, your repayment patterns, and others. Before approving a credit card for you, the bank or lending institution will check your credit score to assess the risk of lending credit. The higher your credit score, the higher would be the credit limit offered to you. In addition, it is also likely that a high credit score can speed up your credit approval process.
2. Know your Financial Habits
Some people may find it difficult to spend responsibly and within limits. If you find yourself to have those characteristics, it is best to reconsider purchasing a credit card. If you cannot pay your credit dues on time in a responsible manner, you may end up paying extra penalties. This would increase your monthly financial expenditure thereby leading to financial stress in the long run. So, ensure that you improve your spending habits as availing of a credit card provides you with more capital to spend.
3. Decide on the Type of Credit Card
There are several types of credit cards available in the market. Each of these credit cards has different features and benefits. For instance, certain cards offer a fuel surcharge waiver of up to a certain amount. Several other cards offer reward points upon purchasing movie tickets and others. Some cards even offer vouchers that can be used on e-commerce sites, dining, travel, and shopping. Joining perks such as flash discounts on certain categories are also very popular. So, depending on your particular needs, ensure to pick the right credit card.
4. Research the Charges and Penalties Applicable
Once you decide on a particular type of credit that you want basing on your unique financial needs and requirements, research all of the fees, charges, and penalties that apply for the card. Some of the fees that are applicable are the joining fee, annual fee, transfer fee, finance charges, foreign transaction fee, cash advance charges, over-limit fees, and others. It is best to keep a tab on these fees and charges to avoid any unexpected deductions in the future. In addition to knowing these charges, understand the penalties that will be charged in cases of late repayments and others. Paying late can lead to both penalties and a decrease in your credit score.
5. Read the Fine Lines
Almost every credit comes with plenty of benefits and rewards. Almost all of your spending habits and your lifestyle habits are rewarded by credit cards these days. But, it is important for you to stay aware of the costs that come along with these perks and rewards that are offered along with the credit card. In several cases, many people underestimate that certain rewards come with. It is best that you clear all of your queries and doubts regarding the benefits that you opt for while choosing a certain credit card. Ideally, your spending habits should not change depending on the benefits offered by the credit card.
6. Begin with Low Credit Limit
Purchasing your first credit card can be exciting. More often than not, many people consider opting for a very high credit limit. However, banks and financial institutions mostly provide first-time users with credit cards having a low credit limit. This is done to minimize the risk of over-expenditure of the provided credit limit. So, availing of a low amount of allowed credit can keep you from spending beyond your financial repayment capacity. It is best to start with a low credit limit so that you can be prompt about repaying your dues. As you continue to repay your dues on time and avoid delays, your credit score will improve thereby making you eligible for a higher credit limit.
In a Nutshell
A credit card can come in handy when you need extra finances to meet your spending needs. However, ensure to research the credit card that you require so that you can be financially prepared to repay your dues. To get a credit card apply on the Finserv MARKETS app depending on your requirements.