How to Choose Your First Credit Card

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If you need a credit card, proceed very carefully...after all, as Mark Twain said "a banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain".

Steps

1. Look for a card that has good benefits. Good benefits may include low interest, promotional interest rates, no annual fee, no bank service charges, air travel bonus miles, credit points toward purchases, credit points toward long-distance phone calls, or credit points for gasoline.
   
2. If offered a promotional interest rate, find out the terms of payment and when the rate will expire. Most cards apply payments to lowest interest charges first, leaving your higher interest charges to collect interest until the entire amount is paid off.
   
3. Ask if there are fees and charges. There may be an annual fee, an application fee, an account service charge, an over-limit fee, a late-payment fee, a cash advance fee, and other miscellaneous fees. Compare these fees to other cards to see if they are trying to rip you off.
   
4. Check the interest rates. Some cards charge interest from the date of purchase. Some cards charge interest from the billing date. Pay all of your bills on time to avoid paying interest.
   
5. Find out if the card offers a standard monthly billing cycle. Some cards expect a payment every two weeks! Ask if there is a penalty for not using your card. Apply. There are usually three ways to apply: through the mail, over the phone and on the internet.
   
6. Activate the card when you receive it. Follow the activation instructions included with the card, usually this can only be done from your home phone. They will try to sell you several services over the phone. Say no. Sign the back of the card before you use it.
   

Tips

• Spend your money wisely, and make your payments on time.
  
• Pay off your entire bill each month (billing cycle). Set a budget on how much you can pay off in one month.
  
• Use your card only within your budget. Do not purchase items that are too expensive, just because you have credit.
  
• If you find you cannot make your monthly payment, stop using the card immediately. Cut the card in half and never use the number again. Cancel all automatic payments that charge to that card.
  
• Banks that back credit cards will frequently ask questions on the application such as "What is your yearly income?" or "What is your current bank account balance?" These pieces of data are what are called "risk splitters." The banks use this information to decide what sort of credit line to assign you. Banks will commonly ask for proof of income as part of the approval process.
  

Warnings

• Make sure that they do not charge any fee for the card, because if they do, they are ripping you off.
  

Related wikiHows

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• How to Avoid the 5 Most Common Reasons for Credit Denial
  
• How to Build Good Credit
  
• How to Cut up and Throw Away a Credit Card
  
• How to Establish Credit
  
• How to Maintain Good Credit
  
• How to Lower Interest Rates on Your Credit Card
  

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