While many people get nervous about debt, if used responsibly, credit cards can be a great tool to help you build your credit. This is important because a good credit score will make financial institutions more inclined to give you a loan in the future!
If you think you’re ready to open your first credit card, check out these tips:
- Look at credit cards made specifically for beginners. As a first timer, you probably won’t be approved for a card with the very best rewards, perks or bonuses. Many of those have high income requirements and are looking for people with longer credit histories. But there are plenty of cards geared toward beginners, and some have decent rewards!
Try researching credit cards designed for college students or a secured credit card, which requires a cash deposit.
- Pay attention to rates and annual fees. Not every credit card is created equal. Some may have annual fees or high Annual Percentage Rates (APR), which is the interest you pay on balances you carry from month to month.
Shop around for cards with lower APRs and low to no annual fees.
- Pay your card in full every month. Your card usage directly affects your credit score. If you’re late on a payment or hang on to large balances for too long, your score can go down and affect your ability to get a loan in the future. Paying on time, in full, every month is a great way to make sure your credit score goes UP!
- Don’t get too close to your credit limit. Much like late payments, getting too close to your credit card limit or maxing out your card can hurt your credit score. A good rule of thumb is to always keep your balance lower than 30% of your available credit.
- Review your statement for unauthorized charges. With a credit card comes the possibility of credit card fraud. It’s important to keep an eye on your charges. If you notice a charge that you didn’t make, report it to your cardholder immediately.
