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What should I know before getting my first credit card?

| Mar 17, 2019 | Consumer Protection

When used responsibly, a credit card can be a welcomed addition to your financial history. You should understand a few key factors before applying for your first credit card however, both to ensure you’re making the right decision and to also make sure your rights are protected. In this case, The Balance offers the following advice to first-time applicants.

A credit card is much like a loan

Financial responsibility is a must when getting your first credit card. Credit cards are a lot like a loan in the sense you will pay interest on the purchases you make for the most part. You’ll be tasked with paying back all the money you spend, and the way you make payments will affect how much extra money you owe. For instance, making minimum payments will keep you in the clear, but can actually cause you to pay more in interest than if you paid off your entire bill each month.

Your income is a factor

A creditor will want to know that you have sufficient income to make payments on your credit card. If you’re without an income or the amount you make doesn’t match the credit card limit, you will likely be denied. In this case, you can ask to join your parents’ account, since their income will be the basis for credit limits. You can also ask another adult to cosign on a credit card for you.

Creditors will aim to minimize the risk

Even if you’re approved for your application, you’ll likely be privy to a lower credit limit. This can actually be a good thing, as it will help you keep greater control over your finances. It will also prevent you from spending too much too soon, which can lead to an exorbitant credit card bill and no real ability to pay it back. Remember, late and missed payments will negatively impact your credit history and will play a role in loan applications and other financial issues. 

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