Getting approved for your first credit card can be exciting and intimidating. While credit cards can be a great convenience, they are also a responsibility. Here are some ideas to remember as you get and use your first credit card.
Things to consider when choosing a credit card
It’s important to do some research while shopping for credit cards. Ask yourself what features are most important to you. Are you trying to build credit? Is the lowest interest rate the most important? What about fees? Depending on your answers, there are a few basic types of cards you should consider. Choosing the card that is best for you involves weighing these factors:
Fees
A credit card fee can include annual fees varying from zero to $75 per year. You should choose a card with no annual fee. Issuers also charge fees for late payments. Be sure to check the terms of the credit card agreement and make sure to pay on time every time.
Interest rates
Interest rates on credit cards also vary greatly and can exceed 20%. Be careful of low introductory or special rates for a limited time if you transfer balances from another card. After the special rate expires, the rate may be higher than you currently pay. Another way issuing companies increase the amount you pay is by how they calculate the interest. Be sure to read the agreement details.
Benefits
Some card issuers offer rewards credit cards that offer benefits for using their cards. Rewards can include airline mileage, discounts on travel, points toward retail purchases, and other benefits. If a card with these types of benefits is important to you, make sure the benefits are ones you will use and that the interest rate and fees of the card do not offset the benefits of the rewards.
Ideally, the credit card you choose will have the lowest fees and interest rates and provide the most benefits when you use it. Unfortunately, most credit cards will not have all three benefits.
Best practices for using your credit card
- Pay off the entire balance on time each month to avoid finance charges and build good credit.
- Use the card for emergencies. Start off slowly with this new convenience, especially until you get comfortable with using the card.
- Never let others use your card. You are responsible for all charges on your card. Just like your checking account, it’s good practice to keep an eye on your monthly statements to make sure you recognize all the charges.
- Avoid using the card for cash advances. The interest rate charged for advances is usually high and interest is charged immediately.
- Create a spending and budget plan. A good rule of thumb is to keep credit card payments under 20% of your monthly income.
- If having a credit card turns out to be a problem, get rid of it or stop using it for a while.
Have questions or need assistance?
If you have questions about this topic or need assistance with your banking needs, please speak to one of our bankers at your local Bar Harbor Bank & Trust branch. We’re here to help you build a solid financial future.
