Your First Credit Card

Why You need One

You might be wondering why you would want a credit card when we hear so much news about how bad it is to get into debt.

Well, not all credit is bad. In fact, it can be just the opposite. Credit cards are now a part of everyday life. You’ll need one to make a hotel or plane reservation or to rent a car. Even if you plan to pay cash, you’ll be asked to provide your credit card as a guarantee against any problems or damages.

Your First Credit Card Builds Your Credit Rating

At some point in your life you will want to borrow money, whether it is to pay for an Education, to buy a car or to get a mortgage.

But if you can’t prove that you are good at paying money back, any applications for credit may be rejected for lack of credit history and that’s where your first credit card comes in. If you can show that you are responsible with credit, it could help your long-term financial future.

Credit Card Doesn’t Mean Go Into Debt

Just because you have a Credit card, there’s no need to get into debt as long as you are disciplined about your spending – before you whip out the card be sure you can pay off the balance in full each month. And don’t think it’s okay to spend just because you are within your credit limit. You still need to live within your means.

So, now we’ve talked about why a credit card can be good for you, how do you go about choosing and obtaining your first credit card?

Choosing Your First Credit Card

First of all, choose who you to apply to carefully. Don’t just fire off lots of application forms hoping you’ll be successful with one of them, because all of those attempts will show up on your credit report and you will simply look desperate to lenders.

Look for a bank which specializes in extending Visa and Mastercard cards to applicants who are just establishing a credit history. Ask your bank if they deal with first-time credit cards and take advantage of the advice they offer. Your bank should be more than happy to sit down with you and explain how to use your credit card responsibly.

It can be difficult getting a regular credit card if you are a student without a steady income but there are firms who offer cards designed especially for students. It’s a good idea of take advantage of one as, by the time you graduate, you should have proved you’re responsible with credit and ready for the next step on the credit ladder. Student Credit Cards

What if Your Application for Your First Credit Card is Denied?

Department Store Credit Cards

If your first application fails, then look at other ways to build up your credit history before trying again. Try applying for a department store credit card to start with. They often have high interest rates but they are useful for building up a better credit score. Don’t get yourself into large amounts of debt, but carrying a small balance for a short period, can actually be a useful tool as it shows you can handle it.

Secured Credit Cards

Another idea to get you started is to get a secured credit card. These work by you placing a deposit with the credit card company before they provide you with a card. Usually the credit limit is the same as your deposit. So, if you put $500 into the account, you’ll be able to charge up to $500. If you prove you’re responsible, your bank may reward you for good payment by adding to your limit without requesting additional payments. Secured Credit Cards

You could also look at a credit card designed for those without good credit histories, and that will include people who have never had credit. These often have ridiculously high interest rates but the idea is you spend a little on your card every month and then make absolutely sure you keep within the credit limit and repay your balance every month.

The key is not to think of high-interest cards as a way to borrow money, but as a tool to improve your credit rating.

Once you have shown you can borrow and pay back money through the use of either a store card or secured credit card, then you can try again for a regular credit card and are much more likely to be successful in your application.

Editor’s Note: Get Someone to Co-Sign for Your First Credit Card

Recently my daughter was heading off for college, so she tried to apply for a credit card and was denied due to a lack of credit history, even though she had a part-time job. She tried several options and nothing worked. As a last resort I co-signed for her card and she was immediately accepted. Remember a Credit Card and a debit card are two entirely different things. A debit card only allows you to spend what you have in the account. A credit card requires more responsibility on your part because it lets you spend money you don’t have. Be sure to only spend what you can pay back when the bill comes due. The key is to apply for a card and request a low credit limit (so even if you get carried away you won’t rack up an insurmountable debt). Then find a parent or grandparent willing to co-sign for you. This is a risk on their part if you fail to pay, so not everyone will be willing to do it. But if the limit is low enough and they know you well and you have shown them that you are responsible they may agree. As you show you are responsible, credit card companies will offer you higher credit limits. Tim McMahon~ editor

It is imperative to stay on top of all bills. Late or missed payments will undo all the efforts you make to build a credit history to the point where you have ready access to credit when you need it.

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