You may have heard that you need to have a credit card to improve your credit rating. So, you then go out and look for the best deal that you can get and start spending. Before you know it, you’re in debt and your credit rating is taking a nose dive.
Don’t let that happen to you! You can take control by knowing these six things before you even think about getting that first credit card.
Chances are you don’t really need a credit card to improve your credit rating. There are many ways to do this. You could ask your landlord to report to credit agencies when you pay your rent on time, or you could ask your utility companies to do the same.
Your cell phone bill and other similar forms of credit will usually show up on your credit report too to show that you can pay bills on time. Don’t just get it for your credit rating.
When you decide to get one, don’t just jump for the easiest one to get.
There are many different types of credit cards available, and all have different annual fees and interest rates. Look out for credit cards that have as low an interest rate as possible. You won’t be able to get the lowest if you don’t have a good credit report, but there are some great options for first time customers.
Many companies offer gimmicks to get customers. They’ll offer zero percent interest for a short period of time on purchases or balance transfers. Don’t fall for these gimmicks.
They encourage you to spend more than you need to, thinking that you’re getting something for a great deal. The trick is to manage your credit sensibly, so you pay fewer fees than anyone else.
There are penalties for all credit cards. The fees differ between companies, so you need to make sure you check them in details. Most companies have a late payment fee and a fee for going over your credit limit.
Others will have fees for not using it for a certain amount of time and annual or monthly fees just for the luxury of having it. Look for those with the fewer fees at the lowest amounts.
If you can’t see it stated anywhere, always ask for the credit limit available. When it is your first card, you will usually have a limit of around $500. However, some companies offer as much as $1,500 to new customers. It all depends on the risks associated with you.
A lower limit is better. You don’t want to end up thousands of dollars in debt, which you run the risk of with a large credit limit available.
Find out about any rewards available for your credit card. Some companies offer cash back on purchases to get you to spend more.
However, you need to make sure you use this sensibly to make the most of the cash back. It will always be less than the interest!