Getting a credit card is a huge milestone. You might be looking forward to the benefits that come with owning a credit card, like building a good credit score. Good research is the key when it comes to getting a good credit card. As a new customer to credit, you might not qualify for a majority of the best credit cards available. These cards with attractive bonuses and perks are only available for people with long credit history and excellent credit scores. The best strategy in finding a suitable card for yourself is to determine your needs. Ask yourself what you expect from your credit card and evaluate all the pros and cons of the interesting cards. However, with plenty of options available, selecting a good credit card can be overwhelming, especially when it is your first card. Here are some of the top things to keep in mind before choosing your first credit card:
Rewards and Points:
When you are starting out with no credit history or score, you likely have to start small with credit cards. You might have options like a student credit card or secured credit card available for you. When signing up for a new credit card, check metrics like Annual fee, Annual percentage rate, Hidden fees, Joining fees, etc. Rewards are a significant reason we sign up for credit cards; therefore, make sure you know the specific reward redemption process for your credit card. Read terms and conditions, check your points regularly, and keep a check on any new offers that you might be eligible for.
Pay Balance in Full:
Your first credit card can be used to build your credit score. Always pay your balances in full to ensure that you are moving towards a higher credit score. The credit score is an indicator of your ability to pay off your debts. Without a good credit score, you might have to end up paying higher interest rates on other kinds of loans. People with higher credit scores often have many perks when it comes to purchasing a home or a car. Use your credit card in such a way that you can repay the whole amount and not just pay the minimum amount due every month. Choose to pay the minimum balance only in the case of an emergency.
Focus on your Budget:
You might be attracted to credit cards with higher credit limits when choosing credit cards. However, credit limits automatically grow when you demonstrate good credit scores. One helpful strategy is to set a budget for your credit card spending, irrespective of the credit limit. A rule of thumb is to spend only 30% of the credit limit and never exceed any more than that. The percentage of credit you have used is called the credit utilization ratio. If the credit utilization ratio is high, it can significantly affect your credit score. The lower your credit card utilization ratio, the better.