The Do's and Don'ts of your first credit card

Credit cards are everywhere. Offered by financial institutions, retailers and other companies, a credit card can be a very convenient form of payment when you don’t have cash available. But for young adults starting out on their own, the first think you should do is learn about credit cards before applying for one.

Here are some common questions related to credit cards:

Why do I need a Credit Card?

A credit card gives you much more financial flexibility when it comes to paying for purchases. Instead of writing a check or paying cash, you’re using credit extended by your credit card company to complete the transaction. Along with the convenience, using a credit card can offer financial protection for purchases, establish or build your credit history and provide you with peace of mind during a financial emergency. Also, many credit cards offer reward programs that can result in cash back, points to purchase merchandise and frequent flier miles. If stolen, your credit card can be cancelled to avoid loss of funds and damage to your credit.

What is “building credit?”

And is it important for me to do so when I am young? “Building credit” means establishing a documented credit history by borrowing money and then paying it back on time through timely payments. This track record of your credit is used by lenders to determine how financially responsible you are in making payments and in helping them determine the interest rate they should extend to you for a credit card, auto loan or even a mortgage. By building credit early, you’ll be able to create a good credit score, which leads to better interest rates and better loans.

What are interest rates?

Minimum payments? How much should I pay back each month? Interest is the cost of borrowing and the interest rate is how much you will be charged to borrow money. Typically, credit card companies will give you a grace period of 21 days to pay off any debt without being charged interest. If you are able to pay off your entire balance, do so. If you can’t, you’ll need to make the minimum monthly payment shown on your monthly statement to keep your account in good standing. If you fall behind in payments or don’t make the minimum payment, it will affect your credit history and your credit score.

Which credit card should I apply for?

There are several types of cards to choose from. Your selection should be based on the interest rate you’ll receive and the amount of available credit extended to you. Ideally, you should select a credit card from a financial institution that has local branches nearby where you can visit if you have any questions about your account or where you can visit to payment.

Ready for your first credit card? Travis Credit Union can help. Along with our credit cards, we have products that can help you build your credit. For more information, please visit our Credit Cards page.

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