Credit cards are an important tool in building your financial future. But remember, applying is the easy part. Using credit wisely is much more difficult.
How Credit Cards Work
A credit card is like a small loan, but you don’t put up collateral to get it. You can use it as many times as you like, up to the total dollar limit allowed. Every month, you must make a minimum payment, but carrying a balance month to month will cost you in interest. If you fail to live up to your obligations, credit cards can ruin your credit history.
Applying for a Credit Card
Although you can walk into your local bank branch and apply for a credit card there, most of us will fill out an application online. This is not something to do from a public Wi-Fi connection or cell phone, because you’ll be entering personal financial information that a thief could use, destroying your budding credit. Apply only over a secure internet connection.
To apply, you’ll need to provide your Social Security Number, date of birth, address, phone number, bank account details and employment information. Always tell the truth about your income and other personal details. Lying on a credit card application can be considered fraud.
Read Before You Sign
After filling out your information, do not click the “Apply” button or sign the form until after you have carefully read the terms and conditions of the credit card. Here are a few basic things to check before closing the deal:
- Annual Interest Rate (APR) – Compare the rate against similar cards to be sure it’s a good deal.
- Late Fees – Know how much it will cost if you make a mistake.
- Special Offers – If the card is offering interest free for a few months or an introductory rate, make sure you know how long the period lasts and what you need to do (or not do) to keep the special offer.
- Grace Periods – How many days do you have after the due date before your payment is considered late?
The importance of these details cannot be overstated. Be certain you know them and are choosing a card with terms you can afford. Doing so ensures you will be creating a strong credit history that will help you in the future.