When used properly, a credit card can be a valuable tool for building credit and helping you manage your money and stick to a budget. Credit cards definitely have their downsides, but if you are financially responsible, having one in your wallet can be a smart move.
When you are ready to apply for your first credit card, there are some steps you should take first. Taking these proactive measures now can improve the odds that your application will be accepted – and that you will use the card responsibly once it is in your wallet.
Set a Spending Budget
Before you apply for any credit card, it is important to set a budget for discretionary spending. Hopefully you have a family budget in place already. If not now is a great time to create one. Knowing how much you can afford to spend will help you control the amount you put on the card and allow you to pay it off when the bill comes in each month.
Document Your Income
When you apply for your first credit card, you will have to supply your total income. It is important to be as exact as you can here, since the issuing bank will verify your income and base their decision partially on that information.
The easiest way to document your income is with your most recent tax return. Find the gross amount on the tax return and use that when applying for the credit card. Do not forget about other sources of income you may receive – things like alimony or money from a structured settlement. Those extra sources of income could tip the odds in your favor when applying for a card.
Check with Your Current Bank
If you are applying for your first credit card, starting with the bank where you have your checking or saving account can be a smart move. An existing banking relationship could improve the odds that your application will be approved.
Furthermore, the representatives at your bank can help you understand how the credit card works and give you information on the billing cycle, payment options and late fees. This information is important for all credit card users to know, but it is especially vital for first-time credit card customers.
A credit card can be a powerful tool in your financial arsenal, and getting off to the right start can help you use it right. Knowing what to expect when you apply for your first credit card is one of the smartest things you can do. After all, an informed consumer is a wise consumer.