You may be a recent high school graduate heading off to college, or a recent college graduate who has joined the work force. Money is tight, whether you are in school, or trying to stretch your paycheck to cover rent, groceries and so forth. A credit card would make life easier, and the TV ads make them seem very attractive. All the same, you have to do a great deal of research before choosing a credit card.
1. Crunch The Numbers
First of all, take a long, hard look at your paycheck and income, and examine your budget. It is good financial practice to pay your credit card balance in full every month. That way, you avoid higher interest rates on a higher credit card total. If you aren’t making enough money to pay the bill, you might want to hold off on getting a credit card. It could set you on the road to racking up greater credit card debt, and lower your credit rating.
2. Do Your Homework
Once you have figured out your income, expenses, and decided that a credit card is right for you, what is the next step? Research.
- Do not apply for a credit card until you understand all the terms and their legal implications.
- If they offer a low rate, find out when and if that rate increases. When is the monthly deadline, and do they offer a grace period? Are there limitations?
- Do not apply for a credit card on the basis of a TV or Internet commercial. You must know all the terms, your rights, and responsibilities.
Read the credit card application before you submit it. By law, it must disclose the terms of its’ reward programs; the late charges; the APR (annual percentage rate) on the balance. If you don’t understand what a term means, look it up. The Norwegian Forbrukslån and the FTC are two great websites that defines and explains credit card terms. Consumer Reports is another valuable resource—they clarify confusing or contradictory language, and give many tools to compare the various cards and their terms.
3. Ask for Advice
It is also a good idea to speak with a financial planner or accountant before signing up for a credit card.
- The adviser can give you objective information on credit cards and how they can affect your finances.
- He or she will know what features are good, and which ones are less favorable. Since you are young, you may be more likely to listen to a professional than your Parents.
- Get professional advice: there is a great deal of hype in advertising, and you deserve to know all the facts before getting a credit card.
4. “Haste Makes Waste”
When you are prepared to apply for a credit card, take your time. Print out and read different credit card applications.
- Compare interest rates, grace periods and reward programs.
- If you don’t quite understand something, phone their customer service line and ask for an explanation.
- Sometimes, you will get more of a sales pitch than an answer—don’t let that stop you.
So, do your homework. Do some research online—the Federal Government has a great deal of material on the topic of credit card, and managing credit card debt. Look at your income and monthly bills. Ask if you can afford to add credit card debt to your budget. If you can, then do careful, detailed research on all available credit cards. Go for a credit card that offers the best terms for your lifestyle and your income.
About the Author: Thomas Alling is a blogger that likes to write about personal finance and share financial tips with his readers.