First Time Credit Cards - What You Need To Know
If you are applying for your first time credit card, you know
that it isn’t always easy or fun getting your foot in the door.
Luckily, lots of good information is available on what to do and
what not to do, as well as what to watch out for when you are making
applications.
Bankrate.com has some great basic information on what to do to
establish yourself as a creditworthy customer, as well as a feature
that lets you compare various credit cards and their fees and
features. A good article on what to do before you apply is available
at bankrate.com at:
http://www.bankrate.com/brm/news/debt/20021108a.asp.
Open a bank account and don’t overdraw it. Apply for a gas card
or a department store card before you apply for a major credit card,
since these cards are easier to get. Buy something and make payments
on time for at least six months. Then you can try to apply for a
major card like a VISA or MasterCard.
Read up on different cards before you apply, and beware of hidden
charges, fees, and outright scams. For a list of potential problems
read “20 Sneaky Credit Card Tricks” at
http://www.bankrate.com/brm/news/cc/20021106a.asp. You can also
compare different cards and their interest rates and features at
Apply For A Credit Card Now.com.
More good advice on
first time credit cards can be found at Kiplinger’s, an online
version of the popular money management magazine, at
http://www.kiplinger.com/basics/managing/cash/firstcc.htm.
If you are turned down for a card the first time you apply, ask
why. You will receive a letter explaining why, but if you know up
front you can get right to work on changing whatever the problem
happens to be. Another recommended option if you keep getting turned
down is to consider applying for a secured credit card instead.
Credit cards are ‘unsecured debt’, meaning the only thing binding
you to pay is your good reputation and your word. If you are young,
or have some credit problems from past mistakes, or both, you can
often get a card which is ‘secured’ by money you place in an account
with the bank issuing the card. So, say you put $500 in a savings
account with the bank offering the secured card. The bank then
offers you $500 in credit. You can’t remove any money from the
savings account; that money is there to cover the card if you don’t
pay or pay late or any number of other problems lenders don’t like
to see.
Once you have made payments on time for six months to a year on
the secured card, the lender may qualify you for an unsecured card
with a low limit. Continue to pay on time and in full when you can,
and eventually your limit will be increased. The lender wants to see
that you can handle credit before giving you any. This is not a bad
way to go, especially if you have credit problems in need of repair.
Just make sure you go with a reputable major bank and read all the
fine print. Some secured cards come with so many extra fees and
conditions that they are not worth even considering.
Credit can be a great convenience, but it can also be a trap if
you don’t know how to use it wisely or keep your spending in check.
Start out slow, make a budget and a spending plan, and don’t let
your credit card balance get out of control, and you will soon be
offered more credit than any sane person needs or wants. In the
beginning, do lots of research and spend little, pay lots, and
things will work out for you much better than if you do the reverse
of all these.
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