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A guide to getting your first credit card

A guide to getting your first credit card

July 26, 2016
first credit card
source: Shutterstock

Are you thinking about getting your first credit card? You should! Whether you’re in college or just getting ready to finish high school, it’s never too early to opt for plastic. Besides the numerous benefits, such as internet purchases, travel rewards, or protection from dishonest merchants, getting a credit card early on will also help you in the long run. You will be able to build your credit history, which will help you get more decent rates when, later on, you’ll go shopping for auto or mortgage loans.

What is a credit card?

But, before you get your first credit card, make sure that you know what it is and how it works! A credit card allows you to take a short-term loan from your bank, to make purchases. As long as you pay the money back within the “grace period,” which is usually around 30 days, the loan does not accrue any interest. If you don’t pay it back in that time period, you’ll have to pay the interest in addition to the borrowed amount.

What kind of credit card should you get?

If you’re new to the game and if you have no credit history, it’s better to go with a secured card. These types of cards require a cash deposit equal to the card’s borrowing limit. They are commonly used to build or even rebuild credit. You do this by making on-time minimum payments to all creditors, by maintaining account balances below credit limits, and, of course, by being financially responsible.

Secured credit cards are also useful if you know that you like to spend a lot, and you want to keep a good track of how much you’re spending versus how much you have.

If you do have credit history and a good level of income, then you can get an unsecured credit card. You’re probably familiar with them, as they are the most common type of credit cards out there. Unsecured credit cards aren’t backed by any deposit or collateral, and their spending limit is based on your income level and credit history. They also come with numerous rewards.

Rewards are important

If you want to get a credit card, then you should also look into what rewards they offer. These come in all different shapes and sizes and can help you save a lot of money. If you love to travel, then get a card with airline miles or travel perks. And if you’re going to spend time in other countries, look for a credit card without foreign transaction fees.

Don’t neglect rewards. They can prove very useful. In today’s costly world, saving some bucks with things like free car-rental insurance really shouldn’t be ignored.

With great power comes great responsibility

Ok, credit card might not give you any superpowers, but you still have to be responsible when using them. Although they include a lot of benefits, they can also be a real pain, especially if you miss a payment. Credit card debt is one of the worst forms of debt, with high interest rates and fat late fees. So be careful when using your credit card and always remember to pay the monthly balance on time.

Thomas Hookton

Thomas Hookton is a finance journalist, history buff and science fiction connoisseur. Hit him up via email.

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