Whether you’re just starting in your financial life or are trying to rebuild after a bad bout of economic challenges, having access to a credit card can significantly simplify your financial life. Managing a credit card will take some practice. If you’ve gotten into credit card trouble in the past, you may need to get a low-balance card through your current bank.
How to Apply
Find out your credit score and look for a card that will suit your current credit rating. If your credit score is especially low, you may want to go to your current bank and apply for a credit card. A card tied directly to your bank account will be quick to pay off. Getting that balance back to $0 once the statement is issued can be very good for your credit rating over time.
If you’re currently rebuilding your credit, your best bet for applying for a card is to look for soft pull options. A soft pull application will not show up on your credit report or impact your credit rating. If you are declined, it won’t lower your credit score.
What to Look For
According to the experts at SoFi, if you’re going to be applying for a credit card, you might as well get a cashback card. Unfortunately, many cashback cards offer a more significant percentage for certain purchases. So, for example, you can get more cash back when buying gas or groceries.
If you choose to use a credit card for regular purchases, you must have a budget to avoid over-spending when using your card. Points and cashback are excellent, but overspending is a poor choice.
A simple way to safely manage your credit card debt is totally up to your fixed expenses, such as:
- Rent
- Utilities
- Groceries
- Insurance
Pay these expenses with a credit card that gives you points to a store you already shop at, such as one of the major grocery chains. Be diligent about not over-spending when using this card and pay off the balance as soon as you get the bill. If you need to make a portion of this payment on each payday, do so. The points on your card should lower your monthly expenses.
What to Avoid
Once you have your card, make sure you don’t spend any more than you did when you were paying cash. Credit cards can lead to over-spending, damaging your debt-to-income ratio over time.
Know the warning signs. You may be headed for trouble if you open the credit card statement and can’t pay off the total balance. Instead, put the card away and back off your spending until you get that balance down.
Credit can lead to over-spending. Don’t put any expense on your card that you don’t have money in the bank to cover. Smart credit cards can make you money, but you will need to watch your spending to make this happen.