In the modern world, credit is needed for almost every purchase or service in the United States. The credit card will help you to pay your rent on time, it will facilitate the payment of household bills and aid in the purchase of goods from the store.
The growth of e-commerce has shown that credit is an important aspect of your life. How will you pay for an item on Amazon from the comfort of your house? How will you order for your favorite books from your room?
How can you even pay for Netflix and other streaming services for your television or computer? Yes, only a credit card can facilitate such payments.
You’re probably wondering, “should I apply for a credit card?” You definitely should! However, you need to know how so you are approved.
“Should I Apply for a Credit Card?” a Guide for a Beginner About to Apply for a Credit Card
Students and non-students alike have abandoned the use of cash money in favor of credit cards because of portability and the ability to buy items online.
Are you about to apply for a credit card? Here’s your guide to help you make the decision.
1. When to Apply for a Credit Card
You should apply for a credit card when you attain the age of 18. The US law considers anybody below eighteen as a minor who cannot make a binding contract or engage in any legal transactions.
It does not matter whether you have many assets or have a venture that generates thousands of dollars a year before you are 18.
Credit card companies also limit their services from people that have attained 18 years but fall below the age of 21. Many organizations consider such as individuals as potential risks to their business as they may not have the assurances needed to attract loans, as no credit check loans are often a way that people will pay back their credit card debt.
If you happen to fall within the category, you will need to access credit using your parents or guardians, as they are likely to offer better guarantees.
Individuals under the age of 21 with employment and sizeable assets could still qualify for the services. Students with part-time work can obtain credit cards as they show they have the ability to repay spent money. Your assets will help the credit card issuers to have some confidence in the repayment of the loans.
After you have attained the mentioned requirements, you will move to the next step.
2. Know Your Credit Score
How can you be approved for a credit card? The first thing you would need to note is your credit score. The credit score refers to your creditworthiness, which many banks and financial institutions compile over several years.
The companies keep records of your daily spending and payment history to show your trustworthiness in matters loans.
Individuals with poor credit ratings often have trouble receiving credit cards from most companies. Why? Because many issuers would not want to lose their money to a bad investment.
Your credit card history will ultimately determine the success of an application. Many credit cards provide access to credit card scores. You can contact your issuer to provide more information regarding the same.
If you lack the time to undergo the process, you can check some free websites that offer credit card estimates. The credit scores will highlight your credit potential. Not all users receive the same benefits and the distinction mostly arises from the figures.
The following information will show some of the denotations of the credit scores:
- A score of below 650 is poor credit.
- A score between 651 and 700 amounts to fair credit as 695 forms the national average.
- A score ranging between 701 and 759 depicts good credit and many issuers will provide you with a credit card.
- A credit score of over 760 is excellent credit.
The issuers consider many other factors before accepting the applications. Some individuals such as students may lack a credit card history. That may not affect the chances of receiving a credit card as long as you prove some few requirements to the issuers.
3. Bad Credit Score?
You may be asking, “Should I apply for a credit card even when I have a bad credit score?”
Sometimes, organizations may make errors with their credit reports. You will need to examine the reports carefully to identify any material mistakes that may affect your chances of securing your chances of getting a credit card.
Your vigilance may help financial institutions to correct the report and help to improve your probability of acquiring exciting benefits on your credit card.
4. Choosing the Best Credit Card
The credit card industry contains many service providers. Just like goods in the local store that come from different producers, many companies offer services. Your choice of credit card will depend on many factors.
i. Interest Rates
You should consider the interest rates offered by the issuers. The interests offered on credit cards affect the amount of money you will eventually pay back to the lender. High-interest rates may burden your yearly budget while lower rates will allow you to settle your bills without strain.
Make sure to compare the interests offered by the various providers before making your choice the next time you make an application.
ii. Repayment Period
Secondly, you will need to consider the repayment period. Most credit cards offer a period of one month. However, as a student, you can consider the Student Rewards Card that offers favorable terms for individuals without a steady source of income.
The credit card allows you to earn some cash back after making several purchases. If you are a student, you may want to consider the credit card as it offers unique benefits compared to other service providers.
iii. Payment terms
Thirdly, you will need to consider the payment policies of the credit card issuers. Your ignorance may cost you a lot after defaulting on repayment. Some companies impose harsh penalties on credit defaulters such as high fees.
You should take some time to read the terms and conditions of your preferred provider to avoid future burdens.
iv. Additional Benefits
Fourthly, you should consider the credit card issuers with other attractive services or benefits. For example, some credit cards offer tracking services for their customers to control the level of spending. If you are reckless in spending money, you should consider such options. The applications will help to lower your appetite for shopping and that will maintain the health of your credit card score.
v. Secured or unsecured
Lastly, like a new credit card user, you should opt for the traditional (unsecured) credit cards. The credit cards allow customers to start making transactions without any consideration. Unfortunately, individuals with a poor credit score will need to opt for secured credit cards.
Such credit cards will require a deposit that acts as an assurance to the issuers. Your credit history will significantly affect your future transactions in the industry.
5. Where to Apply for the Credit Card
Almost every financial institution offer credit cards. Your choice of an organization should depend on previous associations. You should prioritize banks and credit unions that have held your money or assets for some time.
The transactions held by the bank may inform the decision to grant a credit card. Your history with the organization may increase your chances of getting a credit card and enhance the probability of getting satisfactory services.
Hence, you should inquire from banks and other financial institutions that hold your savings accounts whether they offer credit cards.
6. Using the Credit Card
Do you already know how to get approval for credit cards? The next critical information you will need will relate to the usage of the credit cards. This will help you manage your finances appropriately.
i. Don’t Waste
Many individuals get excited after getting their first credit card and embark on a spending spree that eventually ruins their creditworthiness. You may want to go for a shopping spree with the credit cards.
However, you should note that such spending frenzies might affect the ability to repay back the money on time. The first rule of owning a credit card will ultimately encompass financial discipline.
Always strive to spend your money wisely. Avoid impulse purchases as they could affect your budget. The credit card should facilitate the acquisition of essential goods and services.
You should ask yourself: “Do you really need to buy these items?” before you spend your money. The approach will limit your spending and ensure that you will have a good credit record for future use.
ii. Tracking services
On the other hand, you can use tracking services offered by some of the credit card companies. The applications will show the amount spent in a specific period. It will reflect your purchase history and that may allow you to analyze your spending habits.
The features act as vital accounting tools. The more you spend, the less credit you will have and the applications will alert you on the impending exhaustion of the limit.
iii. Remember to Make Payments on Time
Your greatest obligation to the credit card issuers will entail the prompt repayment of the debt. Most people suffer from bad credit scores because of their inability to pay on time. The delay may result from forgetfulness or the lack of funds to repay the loans.
Whichever the case, you should always strive to settle the debts on time. The credit issuers may impose heavy penalties on the delay and register a negative credit score on your report.
iv. Credit Utilization
Additionally, you will need to consider credit utilization to maintain a favorable credit score. Prompt payment alone will not increase your chances for better benefits.
Yes, you heard it. You will need to observe the level of usage of your credit to impress the issuer.
Credit utilization refers to the level of money you owe to the bank compared to your credit limit at any specific time. The measure helps the issuers to track your credit appetite and assess your risk. The information should help you to understand that having large balances on your credit card will limit your credit score over a period.
Healthy credit utilization should strive not to surpass 30% of the overall limit. For example, if you have a credit limit of $10,000, you should aim to use a maximum of $3,000 at any specific time.
The frequent use of amounts exceeding the said figures could increase your credit risk and reduce your chances of approval.
A credit card should not serve the purpose of providing ready money to fund your parties and other unnecessary purchases. As a credit card user, you will require immense discipline to increase your loan limits and credit scores for future use.
7. Credit Card Application Rejected?
Before you sulk and cry over the rejection, you should review your application for any errors. In some cases, you might have understated your salary or age. For instance, you may have mistakenly shown your salary at $500 a month instead of $5,000.
The issuers can reconsider your application after explaining the error and showing proof of your monthly earnings.
Your chances of success should never end with the rejection. Pick up your phone, call the customer service of the credit card issuer, and explain your circumstances. Provide them with valid reasons on why they should entrust you with credit.
Show that you previously registered a poor credit score because of the lack of permanent employment, which you have since acquired. Such explanations could help the financial institutions to reconsider your application and improve your terms.
If everything fails, look for other options. You can obtain a secured credit card with a deposit to act as a guarantee. You can also consider other financial institutions that offer loans without assessing your credit history or risk.
Should I Apply for a Credit Card? The Answer Is Yes
Yes, you should. Take the next step towards financial freedom by obtaining a credit card. The instrument will help to address urgent financial needs and help to improve your liquidity.
Your salary alone may not offer the assurances needed to survive in the modern world. Therefore, should I apply for a credit card? Definitely.
Contact us for more information regarding credit cards, and for your other loan-related needs.
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