Things First-Timers Must Know: Credit Card Application

credit card

Credit cards, as defined by Investopedia, are used to make purchases within the allowed credit line issued by the bank. Think of it as a loan granted by the bank protected by an agreement that you signed. The amount of money you can take from the credit card is limited by what the bank has approved. Credit cards are borrowed money from a financial institution that you have to pay back with interest on an agreed timeline.

Credit Card vs. Debit Card

Credit cards and debit cards are both issued by banks and can be used to make purchases. Both cards contain the card holders’ name, account number, expiration date, Europay, MasterCard, and Visa (EMV) chips which serve as a payment security feature and magnetic strips. Credit cards are money borrowed from a bank while debit cards are money taken out from your own savings in the bank. There are better deals against fraud protection for credit cards as compared to debit cards. Credit cards also have more rewards being offered for every transaction. These rewards can be used in other transactions such as converting points into traveling miles or reward points to make other purchases.

Credit History

If you are a first-time credit card user, take note of your transactions and keep your payment up to date at all times. It is important to build a strong credit score as this can be used as a reference for future transactions with financial institutions. The credit report contains information on your previous and present card payments. If you can, make sure to cover for all the spent items before the due date or at least keep the existing balance to minimal. This should keep your credit score healthy. Do not let the credit interest pile up. Some have fallen into deep debt by irresponsible card use. Others have applied for a credit card to pay for the interest incurred by the other cards. This would lead to an unending payment of interest on your credit cards. Other practices such as missed payments and maxing out your limit will impact your credit score. Remember that a credit card is not your own money being spent but rather the bank’s money so be a responsible spender.

Things to know before getting a credit card

credit cards on laptop

There are plenty of things you should know before getting a credit card. For someone without any credit history yet, chances are you would be offered a credit card with limited rewards and a minimal card limit. Do not worry, this will improve significantly and you can enjoy discounts and rewards once you’ve built yourself with a good credit card standing. As a starter and if you haven’t finished your studies, you can get a student credit card. These are specifically designed for students.

If you are no longer studying, have no credit history yet but need a credit card, your best option is to get yourself a secured card. A secured card is where you have to make a deposit to apply for a credit card. A security deposit is made to be issued with a credit card limit. Secured cards are excellent stepping stones in building your credit rating. You are provided with a credit limit equal to the deposit made. For starters, this is a great product to help you understand the importance of borrowing and paying it back, in a timely manner.

As you are building your credit score, take time in reading the terms and conditions especially the fees and interests. Most credit cards have an annual fee. This is the amount you’d need to pay every year. There are financial institutions where this is waived. Late fees are for those payments where you missed the scheduled payment date. If you are a month late in your payment, this will hurt your credit score.

International transaction fees are incurred for payments made for international purchases. The annual percentage rate (APR) is the fee to pay depending on the balance of your card per month. Over the limit, fees are incurred if you go beyond the agreed limit on the card. Avoid spending more than 30% of your credit card limit. The bank measures how much you are spending versus how much is available and this also affects your credit score.

You can spare yourself from paying the interests and fees. For the annual fee, check which banks are waiving their annual fee. As for the APR if you can avoid this by paying off the full amount of what was borrowed. If this is not possible at least keep it to a minimal amount. Pay as much as you can, leaving the balance on the card with a small amount; this equates to a minimal APR fee. Late payments can be avoided if you keep track of your schedule. You can either schedule an automatic transfer from your debit card to pay your credit card before the deadline. You could also set a notification on your calendar for the payment schedule. This ensures that you are reminded of your payment obligations. International fees and over the limit fees can be prevented simply by not making any foreign payments and going beyond your limit. Make it a habit to go over your bank transactions and review the fees you have incurred. You may have transactions that could have been avoided or transactions that you did not make.

When looking for great credit card deals, do not jump right away on the first offer. Learn to shop around and check the offers by other banks. Compare the requirements, features, and fees to be applied.

Credit Card Fraud

Falling victim to fraud as a first-time credit card user could be scary. But do not worry since credit card issuers offer more protection on credit cards rather than debit cards. If you notice any fraudulent transactions on your card, report them right away to your bank. The bank will then investigate your case and refund the fraudulent charges incurred. If you are disputing authorized credit card transactions, chances are you are going to get the money back. You can also request for the old card to be replaced by a new one.

Credit Card Rejection

You may experience rejection on your first credit card application but do not be disheartened. There are several reasons why refusal for a credit card application is made and the bank will explain this to you for you to take action. Refusal could be caused by insufficient supporting documents submitted, too low income for the credit limit applied for, insufficient credit history, and other reasons.

Basic credit card requirements

To apply for a credit card, you should be at least 21 years of age. If you are 18 years old with enough documents to show that you have a source of income that can be verified, or a parent’s consent to show you might get a credit card. You will also need a social security number, proof of your income, and a completed credit card application form. It is where you will be asked about your name, date of birth, social security number, gross annual income, and housing situation.

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