Tips for Starting Out With Credit
When it comes to credit, what you don't know can hurt you. Credit mistakes are not only expensive, but they can also hurt your credit score and make it harder to get credit in the future. Everyone should know at least the basics about credit, even before you get your first credit card. Understanding how credit and credit cards work helps you make the right decisions about choosing and using your first credit card.
Even though all credit cards have the same shape and size, they don't have the same benefits, and they're not all meant for the same type of credit card user.
Some types of credit cards include standard or plain-vanilla credit cards that have no frills—student credit cards meant for young adults in college, rewards credit cards intended for more experienced credit card users, and secured credit cards for those who can't qualify for a traditional credit card.
Knowing the types of credit cards available helps you choose the right one for you.
Credit cards all have different terms that define the pricing and benefits of the credit card. Interest rates, annual fee, and credit are just a few of the important credit card features.
For each credit card you consider, read the credit card disclosures that detail the pricing for each credit card. Comparing different credit cards to each other helps you see which credit card features are better. In general, low-interest rates and low or no annual fees are ideal, but not always possible when you're just starting out with credit.
Credit cards all have a billing cycle, the number of days between your credit card statements. Billing cycles are typically between 23 and 27 days.
Each month your credit card issuer will send a statement that details your transactions for the most recently completed billing cycle. If you have an outstanding balance, you'll have to make a minimum payment toward the balance. You might not get a billing cycle if you have a zero balance and haven't used your credit card in several months.
It's important to read your credit card statement, especially the list of transactions, to make sure your statement is correct.
Credit card companies make money by charging fees and interest. You can avoid most credit card fees by making different decisions about the credit card you apply for or the way you pay your bills. For example, you can avoid a late fee by making your credit card payment on time. You can avoid a finance charge by paying your full balance every month. If your credit card has an annual fee, you may not be able to avoid it.
It's wise to save money by minimizing the fees you pay on a credit card, even if that means choosing an entirely different credit card.
Credit card companies aren't always willing to give credit cards to first-time credit card users. Knowing where to apply for your first credit card will protect your credit score—if you have one—by keeping credit card applications to a minimum.
If you're repeatedly denied for credit cards, even retail store credit cards, then consider a secured credit card. You'll have to make a deposit to get the credit card, but if you use it responsibly, you may qualify for a traditional credit card after 12 months.