Buy Your First Credit Card
You’re probably familiar with the concept of credit cards. You must have heard about them from your parents or grandparents, or maybe you have one of your own. But if you’re worried about using a plastic card wisely and safely, read on for tips on how to become a savvy consumer when shopping for your first card.
Promising financial experts at SoFi explain, “When you apply, SoFi conducts a soft credit pull that will not affect your credit score. An approved application will result in a hard credit pull, which may impact your credit score.”
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Choose the affinity card that suits you
- Choose a low-interest rate. Look for cards with an interest rate of 19% or lower.
- Choose a card with a low annual fee. If you anticipate using the card frequently, look for one with no annual and no foreign transaction fees. Otherwise, choose one that charges an annual fee of $50 or less and consider it the cost of convenience if you don’t travel overseas often enough to justify paying more than $50 in foreign transaction fees every year.
- Choose a credit card limit that matches your needs. You want to avoid getting overwhelmed by debt—especially since this will make it harder to build credit in the long run. But setting too low a limit may also lead you to overspend!
Pay attention to credit limits, interest rates, and annual fees.
When shopping for your first plastic money card, pay attention to credit card limits, interest rates, and annual fees.
- Credit limit: The amount you are allowed to borrow (with a maximum of $25,000)
- Interest rate: The amount you pay for borrowing money. The lower, the better!
- Annual fee: The amount you pay to use the card. Some cards have no annual fee, while others have an introductory offer with one but then increase it later on. If there is no introductory offer, look into other cards with such offers before deciding where to apply.
Decide whether to get a secured or unsecured Credit card.
Your first credit card can be a great way to build your credit score, but there are different types of cards you can apply for.
Secured cards are backed by collateral, such as a savings account or a certificate of deposit (CD). You’ll need to deposit money into an account as collateral, which the bank will hold as security if you don’t pay your bill on time.
Unsecured cards do not require any collateral backing them up. Suppose you don’t make payments on time and meet other requirements for getting one in the first place.
Understand how building credit works.
When you apply for plastic money, the lender will look at your credit history and use it to decide whether or not to approve you for the card. Your credit history records how you have paid your bills in the past.
It shows up on your credit report as information that lenders can use to calculate your credit score, which is a number that represents how likely it is that you’ll pay back what you borrow on time.
Hopefully, this article has helped you to understand how to get a secure card. Fortunately, many options are available, so finding the right card for your needs shouldn’t be difficult.