5 Things to Consider Before You Sign Up for a Credit Card

credit card

Having a credit card can be a lifesaver in many instances. Because it’s typically associated with people who are in perpetual debt, friends and financial experts alike might discourage you from getting one. However, the truth is, a credit card can only be as bad as your spending habits.

Maintaining a good credit score is all about living within your means. As long as you’re consistently making an effort to spend only within your budget, having a credit card shouldn’t negatively affect your financial state.

Is Your Financial Attitude Ready for a Credit Card?

In an ideal situation, the pros of credit cards typically outweigh their cons. After all, it’s a convenient way to pay for various stuff, especially for online bills and purchases. However, a person who doesn’t have any financial discipline is bound to suffer the worst of a card’s cons.

Do you think you’re already at a place where you can responsibly handle a credit card? Listed below are 5 of the most important things that you should consider before you push through with your application:

1. Credit Limit

Most starter credit cards have a low credit limit to gauge if a user can properly pay off their balances on time. The limit is the maximum amount that your credit card company is willing to lend you per month.

When the company notices that you have good-paying and spending habits, they may increase your credit limit without you having to ask. Other times, you’ll have to request for it and justify why you deserve the limit increase. No matter what your credit limit is, the key is to never go over it at any given month.

2. Interest Rates

The card’s interest rate is termed APR (annual interest rate). If you’re unable to pay your bills in full, this is the additional fee that you’ll have to pay on top of your remaining balances.

The rate can either be fixed or variable. As the name suggests, fixed rates won’t change from month to month, while variable rates can change depending on certain factors.

3. Penalties and Fees

Aside from interest rates, credit card companies also make money off of users through penalties and other fees. They usually charge for:

  • Late payments
  • Going over the credit limit
  • Cash advances
  • Balance transfers
  • Annual fees

As you shop for cards, make sure that you review all their fees thoroughly so you can shortlist the ones that don’t charge unreasonably.

4. Perks and Rewards

Of course, they are not just about the fees, they’re also about the rewards! To encourage people to use the card more, companies typically have rewards programs. Among the most useful ones are cash back rewards or travel rewards.

It’s advisable to read and compare how the rewards systems of various cards work. Go for the one that has convenient redemption options and conditions that sound fair to you.

5. The Card’s Purpose

Credit cards can give a user the illusion that they have unlimited purchasing power. This is exactly the reason why not everyone should have a card.

Ultimately, you should know why you’re getting a credit card in the first place. Whether it’s just for emergency purposes or for overall payment convenience, make sure that you go for a card that matches your needs.

credit cards

Your First Credit Card Can Make or Break Your Credit Score!

Getting a credit card is a great credit score booster—but only if you use it properly. Your card transactions will be reported every month to the credit bureaus. These reports will include how much of your credit you’ve been using, and if you’ve always been paying on time.

Maxing out your credit limit and paying late will give you bad scores. To be on the credit bureau’s good side, you must commit to always pay your bills in full—and on time. When you apply for a credit card, make sure that you have what it takes to be a responsible credit card owner.

Credit Card Ownership is a Huge Responsibility

Owning a card can afford you some financial leeway, granted that you use it right. Remember that it’s never meant to be swiped mindlessly like an unlimited source of cash. You’ll still need to pay for everything you bought with it when the bill comes.

Overall, a credit card is a responsibility that’s only suited for the financially mature. If you’re self-aware enough to recognize that you need more time to develop better attitudes towards money, you may put off applying for a credit card until you become more financially ready for it.