If you are earning a steady income and are over the age of 21, you might want to start thinking about getting a credit card.
Not only is it incredibly convenient to buy things when you have a credit card, but using one responsibly ensures a good credit score that will help you get approvals and lower interest rates on big loans such as housing or car loans, as well as approvals and higher credit limits on future credit cards.
Applying for and owning a credit card for the first time might be a bit daunting if you are unfamiliar with the credit card landscape, but these tips will hopefully make the process a little easier:
Rejection
Let’s get this out of the way first—you might not get approved for every card you apply for. Since you have not built a solid credit history yet, credit card issuers or banks might be hesitant to grant you one. Rejection in any form can be soul crushing, and this is no different with credit cards. OK, so it might not be that serious, but it can get discouraging after a while.
Some applications may take months to be processed as credit card issuers need to gather all the required information and review each application, so it is tempting to keep applying for different cards until you get approved for one.
The problem with this is that there is an increased likelihood of rejection if you apply for too many cards at one time.
Every time you apply for a credit card, an enquiry is made into your credit history to the credit bureau. A high volume of enquiries can adversely affect your credit score and thus your chances of getting approved for a card, so wait a few months between applications.
No Annual Fees
For your first credit card, it’s better to get one without any annual fees attached. If you are just starting to work, you’d probably want to save money on any area you possibly can. Annual fees can be one of these areas. While cards that have annual fees might come with better rewards, no annual fee credit cards are nothing to sneeze at and often offer benefits that are just as good.
Be sure to read the credit card disclosure of each card you are looking at, as some cards might start charging an annual fee after a seemingly free first year. If you do end up getting charged a high annual fee, try calling the card-issuing bank to ask for a waiver.
They are usually understanding enough to waive the annual fee, especially if you have been a loyal user of their card. After all, they don’t want to lose a customer! If they still refuse to waive the fee, just cut your losses and cancel the card. There are plenty more out there.
Pay Off Bills As Soon As Possible
Paying off your bills these days is easier than ever, so there really is no excuse to delay payments and risk having to pay late fees. With options to pay through online banking with each major bank as well as the AXS app, you can pay off outstanding fees right from your phone!
Start small with your purchases and never max out your credit limit as it will come back to haunt you. Always pay off your balance in full every month to avoid blemishes on your credit report and having to pay interest. Speaking of which…
Always Be Aware of Interest
Having to pay interest on an unpaid balance is a huge incentive not to be late on your payments. Most credit cards have an interest rate of about 24-26% per annum. That sounds like a crazy high amount, doesn’t it? Combined with compound interest (that is, having to pay interest on the interest) with each passing month you owe money, it is very easy to accumulate debt if you only pay off the minimum sum, or even if you don’t pay the balance owed in full. This should be a motivating factor in getting you to clear your credit card bill ASAP.
Personal responsibility
Last but definitely not least, personal responsibility plays a big role in owning a credit card. Being older doesn’t automatically mean wiser when it comes to spending.
The golden rule is: if you don’t have the money, don’t buy it. Living within your means is the simplest way to achieve financial security. Every card you own is a part of your credit history, so the onus is on you to maintain a good credit score by not committing credit mistakes such as racking up high balances and making late payments.
Also, don’t forget to conduct thorough research on a merchant before purchasing anything with a credit card (especially online) so that you don’t leave yourself vulnerable to credit card fraud.
Now that you know what to expect when it comes to applying for and owning a credit card, all that’s left is to find a card that suits your needs, fill out the necessary forms and you’ll be well on your way to getting your first credit card!
Written by Aida Jalal.
About the Writer: Aida loves shopping but hates wasting money. One of her favourite things to do is to look for the best deals across credit cards and shops, and try to tell as many people as she can about them. Some might call her an enabler(her friends certainly do), but she prefers to think of herself as helping others become smart customers.
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