Whether you’re applying for your first credit card, trying to establish credit, or rebounding from a bad dose of credit card debt, there’s a few common questions that come across an individual’s mind. We’re taking some time to answer the top 10 credit card questions in hopes of directing you on the path towards being a credit card superstar.
1. It’s my first credit card, where do I start?
Obtaining a credit card for the first time is a big responsibility and a decision that should have plenty of thought behind it. Before submitting that credit card application, ask yourself if the credit card is something that you need. Do you honestly need it?What will you be using it for? If you can answer those simple questions confidently, then the next step is to do your research and compare various cards from top to bottom.
2. What information will I need to apply for a credit card?
When applying for a credit card, the information that you need is fairly simple. Could that be why NerdWallet listed the average American household credit card debt is over $15,000? Perhaps. But, typically you’ll need to enter a personal address, social security number, and few other personal qualifiers (e.g. yearly income).
3. Cash back, interest rates, annual percentage rates (APRs), reward points; what does it all mean?
- Cash Back credit cards allow you to earn cash back on every purchase.
- Interest rates and APRs are the same thing. They are the interest that you pay on the money you borrow by using your credit card. The only way interest will not accrue is if you pay off the balance of your statement each month. It’s also important to note that late payments on your credit card equal a higher APR.
- Rewards Points are an added feature to some, but not all, credit cards. For example, our LRRCU MasterCard® and VISA® cardholders are able toenroll in UChoose Rewards for extra perks like travel and shopping.
4. Is a credit card through a retailer or financial institution my best option?
This again goes back to your original question, “why do I need this credit card?” Retailer credit cards, or store cards, can typically only be used in that store. They often have higher APRs and you will end up paying more in the long haul. Therefore, obtaining a credit card through a financial institution, like your friendly local credit union, will often yield lower interest rates and better benefits to cardholders.
5. How can I use my credit car d responsibly?
Using your credit card responsibly is the main goal of any person with a credit card. We suggest setting limits for each month, paying the credit card balance off each month, and limiting the total number of credit cards that are issued to you.
6. My credit score is poor, how can I build it back up?
So your credit score is the pits, huh? Well, you can only go up from here! Instead of digging yourself deeper in the hole, it’s time to focus on one thing: getting rid of debt! While it may seem like it’s a task that will take eons to get back in the green, you can take the time to educate yourself about smart spending habits and build yourself back up.
7. I’m in college, where should I start with my first credit card?
College students can get into trouble with credit cards. You’re away from home and could possibly be running low on money. For you, it’s easier to swipe your card at the convenience store instead of refrain from getting those study snacks. But, credit card education is the best option for college students. Being aware of APRs, interest rates, and best practices will help college students get started on a safe financial future.
8. What’s a secured credit card?
A secured credit card requires the cardholder to give a collateral deposit that is added to the credit line for that credit account. Secured credit cards are great for people with poor credit scores and has plenty of opportunities to increase credit.
9. I went a little “swipe-happy” and maxed out my credit card, now what?
Yikes! It’s never something that a credit card holder wants to do, but it happens; and that’s OK. The next step is to put the card away so that you can start chipping away at the balance. Don’t short yourself in order to put a dent in your credit card balance, be aware of all of your financial responsibilities and slowly, but surely, you’ll get your credit allowance back.
10. I know I need to establish credit, but my parents were in a lot of credit card debt and I don’t want to follow that path. Help!
This is a common question that many individuals have about applying for, or having, a credit card. The most important thing to make sure that you can stay out of credit card debt is to educate yourself. Speak with a financial representative to create an effective spending plan for yourself and take control of your financial future. We’ll help you do it!
Whatever questions or concerns you have, we can help! Our LRRCU staff is skilled to help you develop a spending plan, apply for a credit card, and connect you with a financial advisor to secure your financial confidence.