Choosing Your First Credit Card

The following information will help you choose and use your first credit card successfully.

Are You Ready For Your First Credit Card?

Before choosing your first credit card make sure you have considered the following.

Income

Do you have a steady job or income? You must have an income in order to pay for your purchases made on credit. Failure to pay for credit will lead to heavy debt and perhaps eventual bankruptcy.

Temptation

Will you be able to resist the temptation to overspend? Using credit responsibly requires a lot of self discipline.

Motive

What is your motive for getting a credit card? Is it to build a good credit record, the convenience of credit, or to be able to make spontaneous purchases when you do not have cash?

After considering the above, if you still think you are ready for a credit card, choose carefully.

Choosing a Credit Card Company

Credit card companies offer many different incentives. In order to choose the card that will best meet your own personal needs consider the following.

Annual Percentage Rate (APR)

The APR measures the cost of credit on an annual basis. It includes the interest rate, service charges, loan fees, and various other costs. Usually, the lower the APR, the lower the cost of credit. Using the APR may be the easiest way to compare costs among credit cards.

Annual Fees

Some credit card companies charge an annual fee regardless of whether you make any charges on your credit card, while others never charge annual fees. However, the absence of an annual fee may be coupled with an elevated APR. Consequently, you should consider the credit card’s APR when deciding whether to obtain a card with or without an annual fee.

Grace Periods

A grace period allows you to avoid finance charges by paying your bill before the due date shown on your statement. If you are not given a grace period you are charged finance charges from the day you make the charge until the day you pay it off. Some credit card companies offer grace periods from 21 to 30 days, while others offer none.

Other Charges

Be sure to find out if you will be charged any fees for things such as paying your bill late or charging more than your credit limit. Several little fees can make a big difference in the cost of credit.

Using Your First Credit Card

Using a credit card can be a positive experience if you are knowledgeable of your responsibilities as a cardholder. Consider each of the following suggestions.

• Never lend your card to anyone.
• Never leave your card or receipts lying around.
• Keep all receipts in a safe place.
• Destroy all carbons and incorrect receipts at the time of purchase.
• Never put your card number on a postcard or on the outside of an envelope.
• Never give your card number over the phone, unless you are certain the company or organization is highly reputable and you initiated the call.
• Sign your credit card in ink as soon as it arrives.
• Keep a record of your card number, its expiration date, and the phone number and address of the card company, in a safe place separate from your wallet.
• Do not sign a blank receipt.
• Draw a line through blank spaces on charge slips above the total so the amount cannot be changed.
• Open billing statements promptly and compare them with receipts you have saved.
• Promptly write to the credit card issuer if any questionable charges appear on your statement. In the case of fraud, or disputes with a seller, the credit card purchase is open to challenge for 60 days.

Common Concerns

Help, I can’t pay my bill!

If you are ever not able to pay your credit card bill, try to work out a modified payment plan with the credit card company as soon as possible. You may also want to contact a non-profit debt counseling service. They are often offered by universities, military bases, and credit unions.

My credit card is missing!

As soon as you notice your card has been lost or stolen call the card issuer. Most companies have a toll free phone number printed on their statements to use when reporting a lost or stolen card. After you have called to report your card missing write a letter to the card issuer. The letter should include: your name, your card number, the date you noticed the card missing, and the date you phoned the issuer to report your card missing. Keep a copy of this letter for your files. If you report your card missing before it is used without authorization, you may not be responsible for any of the unauthorized charges. If your credit card is used without authorization before you report it missing, the most you will be liable to pay is fifty dollars.

There is a mistake on my bill!

Always check your credit card bill promptly and carefully. If you notice a mistake take the following action: Send a letter to the “billing error address” given on the monthly statement or credit contract. Include in the letter: your name, account number, the date, the dollar amount of the charge in question, and why you think there is a mistake. The credit card company must let you know that it received your letter and corrected the mistake, or explain why the bill is believed to be correct. Make sure to pay the charges on your credit card bill that are not in question. Using a credit card wisely can make shopping more convenient and help you build a good credit history. Remember to choose your cards carefully and use them responsibly.

(state.id.us/ag/consumer/tips/firstcreditcard.htm)