Step-by-Step Guide: How to Apply for Your First Credit Card
NEW YORK - December 17, 2021 - ( Newswire.com )
iQuanti: Credit cards are an invaluable financial tool when used correctly. They allow cardholders to build credit, earn rewards, and protect against fraud. If you’re ready to find the best first credit card for your budget and needs, here’s what you need to know about how credit cards work and how to apply for one.
How do credit cards work?
You can think of a credit card like a debit card that doesn’t require funds in your bank account. Instead, when you swipe your credit card in-store or online, the charges are credited to your account for repayment at a future date.
Credit cards work on a monthly billing cycle. So, the spending you do this month isn’t technically “due” until the monthly cycle closes. Then, you’ll be able to pay a minimum amount or the full amount due. It’s important to understand that failure to pay the balance due in full before your next billing cycle means your creditor can charge interest. And interest rates on credit cards typically come with a high annual percentage rate (APR), or how much creditors charge in interest throughout the year.
To protect consumers, credit card companies create a credit limit for each borrower that will be based on credit history. For that reason, many first-time cardholders will receive a low credit limit. Then, as you improve your credit score and establish a history of on-time payments, you can request credit limit increases as time goes on.
How to apply for your first credit card
The process of applying for a credit card is relatively simple if you follow these steps:
1. Research credit cards and companies
There are many different types of credit cards, from cashback to travel rewards. So, before you apply for any cards, it’s critical to determine which type of card will serve you best. An easy way to do this is to reflect on your current spending.
If you’re already using a debit card for purchases, look over the past few months of account statements. Then, let those spending habits drive your decision and find a reputable credit card company to work with. That means looking for companies that offer great customer service and a proven track record of customer satisfaction.
2. Check your credit score
Before approving someone for a line of credit, credit card companies will check your credit score. This allows them to assess risk and gauge creditworthiness. Brand new borrowers may not have a credit history. If that’s you, the best first credit card may be one for those with no credit history. That’s because in lieu of a credit score, creditors may review things like income or employment history when deciding whether to approve you.
3. Prequalify if you can
Many credit card companies allow you to prequalify for a card online before you apply. That means the creditor runs a soft credit check which is not reported to credit bureaus and won’t impact your score. Prequalification can let you know what kind of card you may be approved for and the estimated credit limit.
4. Submit an application
You can apply for most major credit cards 100% online. You’ll want to be sure you have identification information like birth date, legal name, address, and Social Security number. You may also need to submit information about your annual income, so it’s good to have those details handy too.
5. Wait for approval
For online applications, you may receive an approval decision in minutes. But it may take several days or weeks to receive your new card in the mail.
6. Come up with a repayment strategy
Before you receive the first bill, be sure you have a plan in place to manage credit card payments. That may mean setting alerts for spending or setting up autopay to debit the monthly balance due directly from your checking account.
The bottom line
Credit cards can be great financial tools if they’re used responsibly and paid off regularly. Before you apply for a credit card, be sure to do thorough research on cards and companies. Then, pull together your personal details, including income. Doing so can help streamline the application process and make applying for your first credit card much easier.
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Original Source: Step-by-Step Guide: How to Apply for Your First Credit Card