Beginners Guide to Applying For a Credit Card

Beginners Guide to Applying For a  Credit Card

Beginners Guide to Applying For a Credit Card

(Last Updated On: September 26, 2016)

Anybody can be disciplined enough to pay back every cent of money they borrow every month, it just takes a bit of practice. But if people follow a few simple steps, a credit card can be one of the safest, efficient, and most secure ways to shop, saving you countless amounts of time and frustration. Be careful though, especially if you’re just starting out, it’s very easy to run up a huge bill that you won’t be able to pay back for quite some time, ultimately affecting your credit rating negatively.

First Things First

What a credit card basically does is it enables you spend money on credit, simple as that. You’ll be allowed to spend up to a pre-set limit, and depending on how confident your card provider is that you will be able to pay it back, this limit might be from a few thousand to a few million. Make sure that you never spend more than you can pay back every month. This way you won’t pay

interest on that borrowed money (cash withdrawals are often the exception to this). It’s one of the most important things to remember that will limit the amount of money wasted. Because when you don’t pay back the money that you loaned in full then you will be charged an interest rate. And this is how banks make most of their profit. Try to never use your credit card for withdrawing money at a cash machine or ATM. Try to limit this habit. It is where you’ll get hit the hardest with extra charges. People often forget this and pay for it down the line…

Here are a few things you need to know about how credit cards work:

  • In-Store Shopping. You can pay using your credit card at any point of sale terminal. Just enter your PIN code and it’s done. Most major retailers now also have the technology that allows you to just tap your credit card to make a contactless purchase. Very convenient.
  • Online Shopping. Pay using your credit card at almost any online retailer’s website checkout. You just have to enter your 16 digit account number printed on the front of your card, the expiry date and your CCV code. You will then be required to enter your password before the transaction can be finalized.
  • Making ATM Withdrawals. Although it’s not advisable because of all the extra charges associated with this method, sometimes we simply have to pay in cash. So in fact it’s a real benefit having this option. Daily limits on the amount you will be allowed to withdraw usually apply depending on the type of card you get.

Some General Features of Credit Cards:

  • Interest Rates. The percentage rate of your interest is shown on your monthly credit card statement. Become familiar with this number, it will affect a lot. Your interest rate is calculated based on your balance at the end of the statement period is then required to be paid off monthly until your balance is cleared.
  • Interest Free Promotions. Many credit cards offer interest free promotions for new applicants. These promotions can really save you a lot of money in interest repayments. But they don’t last forever. Make sure you look around and see who’s offering the best deal.
  • Credit Limit. A purchase or cash advance amount is deducted from your available credit. This is the limit you were assigned by the credit card provider.
  • Credit Card Statements. A credit card statement is issued about a month after you have activated your account, and every month after that. Here you will find a record of any account activity, your charges, and any other information you may need. Make sure you keep a note of your minimum repayment due every month and follow it if you want to keep your credit in good standing.

Do I Qualify?

  • You must be 18 years or older to apply for a credit card. And with some cards 21 years is the minimum age.
  • If you’re pretty certain that you’ll be able to pay off the amount you will borrow every month then you may qualify.
  • You will have to undergo a credit assessment by the card provider that you apply with. If you have a good credit rating you’ll likely find success. It will also give you access to those cards that offer the lowest interest rates and the best promotional offers.

Is It Really Worth It?

  • The Safety Factor – Using a credit card is much safer than paying in cash. In the worst case scenario where your card gets lost or stolen, all you need to do is immediately call up your bank and cancel it.
  • The Convenience Factor – If you find yourself in a situation where you’re strapped for cash then a credit card will give a you much needed boost it times of need.
  • Accepted Everywhere. Credit cards are generally accepted at all of the places than might reject your attempts to pay with another type of card.
  • Extras – There are often a lot of free deals that come with credit cards – things like cash-back, air miles and reward points.
  • Can I Have Multiple Cards?

The average consumer is estimated to have nine different credit cards. There really aren’t a set number of credit cards someone "should" have. A selection of different purpose cards will usually suit the needs of most people. Before applying for a retail card, try and make sure that it’s for somewhere you buy from on a regular basis, and be careful to read all the small print before, as retail cards at commonly known to charge interest rates higher than normal credit cards.

What Is A Balance Transfer?

A balance transfer can be really useful to people who already have a credit card. It allows you to shift the balance from one card onto another card for just a small fee. This can enable you to enjoy many benefits such as rewards programs or extended interest-free periods.

What If I Am Too Young For A Credit Card?

If you’re still a teenager, you still have the opportunity to start building a good credit rating. This can be done by having your parents make you an authorized user, but you will have to be attached to their card. There is also now the option in some credit card companies for parents to actually co-sign for their teens, enabling them to get their own credit card. The minimum age requirements vary between lenders. The qualifying age for getting your own credit card used to be 18, but a new Act the came into law in 2009 now requires anyone under 21 to have a cosigner or a verifiable income proving you will be able to repay any debts.

Credit cards for teenagers can be a very dangerous thing, but they can also be a blessing in disguise. Poor impulse control can be something that follows a teenager for the rest of their lives, unless they are forced to learn about personal responsibility and take control, there’s really no better way than the responsibility that comes with owning a credit card.

Building good credit as early as possible can be very beneficial to a person’s financial future. Don’t wait until you’re out of college to get your first credit card, because chances are you won't have a good enough credit to lease an apartment or apply for a car loan.

It’s simply a fact we have to face, credit play a crucial role in many of your financial determinations, and being forced to learn good habits right at the beginning can really give a youngster the ability, when applying for many things in the future, to have a fighting chance at success…

Before Doing Anything

There’s a few things that you need to do before even thinking of applying for a credit card:

  1. Create A Budget – Track all you’re spending over the course of a month. Take note of what you’re spending your money on. Then figure out where and how you can cut costs… When you learn exactly where you are spending (or wasting) money, you'll know exactly how much you can charge on your card.
  2. View Your Credit Report – everyone is allowed by law to view their credit report (free) annually.

 

Why Do So Many People Hate Using Credit Cards?

Having access to a credit card can make it very easy to spend money. Overspend money, or to spend money that you don’t have yet. Many studies have actually shown how we are much more likely to complete a purchase if we’re paying with a card as opposed to paying with cash. For some reason paying with a credit card just doesn’t produce the same kind of psychological resistance that making cash purchases does…

Credit cards make it really easy to spend money that you don’t have yet, and this has the potential to cause some really serious debts down the line. People spend more money than they otherwise would. In practice, many people have no respect for the process and this can really harm their financial future, who wouldn’t hate that?

Pay Close Attention to Your Interest Rates

The interest rates on your credit card can range quite a bit. From 0 percent, balance transfer offers to as much as 30 percent. The factors that your credit card company uses to calculate this are:

  • Your payment history
  • Your monthly income
  • Your credit score or credit rating
  • Your current outstanding debts
  • The value of your assets
  • How frequently you make a credit inquiry
  • The economic conditions in the area you live in

Each of these data points goes into calculating your Annual Percentage Rate (APR). So if your goal is getting the lowest rates, then you should pay attention to these factors. Write them down, memorize them, and you will save thousands if not millions over the years…

Remember Your Rights

As a credit card holder, you do have some legal rights to fair treatment you should be aware of. The ‘Truth in Lending Act’ requires credit card issuers to explain in detail all of the terms of the contract that they want you to sign, in clear language that an average person can understand. If you run into any problems with your bill, like being overcharged for something, or having unknow charges taken off your account balance. The ‘Fair Credit Billing Act’ gives you the power to dispute these cases, and it also has the power to protect your credit rating during this.

Take Your Contract Seriously

Make sure you read your contract carefully, if unsure of any of the terms your card issuer should be happy to explain it to you. Once you sign it, you will be forming a legal contract and consenting to the terms that are laid out within.

Ultimately, there is only one person that can make sure you use your credit card wisely, and that’s you…

 

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