Deciding whether to get a credit card or not can either be a very easy decision to make, or a very difficult one. You may be concerned about your ability to use credit responsibly. Or you may be worried about the fees and interest costs involved. On the other hand, you might be super excited about getting your first credit card because of the freedom it will give you. Either way, this is a question you are likely to ask yourself – What credit card should I get.
There are a few different types of credit cards out there that vary in terms of their features. So, if you’re looking to get a credit card for the first time you’ve come to the right place. Here we’ll tell you all you need to know about what different credit cards are out there.
How does a credit card work?
Credit cards are forms of ‘credit’ which means they are a way of borrowing money. They allow you to pay for goods and services without having the money in your account. Then you repay the credit card balance at the end of the month.
What credit card should I get – What are the different credit card types out there?
- Standard credit cards – this is a regular credit card that doesn’t offer any frills or rewards. It allows you to use a balance up to a certain credit limit. The balance that you spend must be paid at the end of each month to avoid paying late fees.
- Rewards credit cards – rewards cards offer rewards based on the purchases you make on your credit cards. The way It works, is you earn points for every dollar you spend on your credit card. Though there are often higher fees involved with these types of credit cards.
- Student credit cards – these types of cards are made for college students who have little or no credit history. They come with lower interest rates and are meant for students who are enrolled in a 4-year university course.
- Secured credit cards – this is another option for students, or those who don’t have a credit history or who have a bad credit rating. The way these cards work, is that you must place a security deposit on the card. The credit limit is often equal to the deposit.
- Charge cards – these types of credit cards don’t have a spending limit, though the balances must be paid in full at the end of each month. To get this type of credit card, you will normally have to have a very good credit rating.
- Subprime credit cards – these are not very good credit card options as they are designed for people with a bad credit history and often have very high fees.
- Business Credit cards – these credit cards are specifically designed for businesses, as they allow business owners to keep business transactions and personal ones separate. Businesses can either get standard credit cards or charge cards.
What credit card should a college student get?
As a college or university student you may be wondering whether you should get a credit card or not. You may also be wondering what credit card should I get. As a student, it’s harder to get a credit card since you don’t have a credit history and may not have regular employment. Though some banks offer credit cards specifically for students.
Credit cards for students usually have lower interest rates, no annual fees, and up to 45 interest free days. Getting a credit card as a student allows you to build up a positive credit rating if it is the first time you are using credit.
What credit card should I get – How to choose a credit card?
When you ask yourself what credit card should I get, what you are really asking is what factors should I look at when it comes to deciding the right credit card for me. Here is a list of what to look for when choosing a credit card:
- Interest rates – it’s important to look at the APR for the card. This is basically the cost of borrowing money on the card. Some cards the say they have a 0% APR but this may only be the initial rate, it could increase after a certain period. Comparing the annual percentage rate (APR) between credit cards might help you to decide which credit card to go with.
- Rewards – if you are looking to gain perks from your spending you may want to get a rewards card. They allow you to build up points that can be used for anything from airplane miles to gift cards. The type of rewards you get will depend on the credit card company you use.
- Annual fees – This is another factor that will influence what credit card you choose. Some cards have high annual fees, and if you’re not using your credit card very much then it could be costing you more than you are earning back from your rewards.
How to choose a credit card provider?
Answering the question what credit card should I get could come down to what credit provider you should choose. There are few factors you should consider when deciding which credit provider, you should use.
- Accessibility – this means how easily you can contact and visit your credit card provider if need be. You may want to consider whether there is a local branch close by, or if they are plenty of ATMs around.
Not using your credit card provider’s ATM can cost you $2.00 per transaction - Customer service – being with a large banking corporation my mean you have less personalised customer service. Whereas if you were to borrow from a smaller bank you might get a more personal service. Though the interest rates may be higher than with larger banks.
- Extras and benefits – your decision about what credit provider to choose might be influenced by the benefits offered by your provider. Some things they might offer are discounts on some goods and services or they may offer some insurance services.
What credit card should I get – Tips!
- Get a card that has interest free days so that you can pay off the whole balance before you are charged any interest
- If you do think you will roll over your interest free period try and get a card that has low interest and fees
- You don’t have to get a credit card with the bank that you use, research online what other credit card deals are out there
- As bank for key fact sheet, which will outline the key features of that credit card – this will easily help you to compare credit cards with each other
How to get approved for a credit card?
Once you’ve identified what credit card should I get, you will have to make a credit card application. To get approved for a credit card, it’s important to first look at the eligibility criteria. Different credit card providers may have prerequisites that influence whether you are approved for a credit card or not. The factors that you will be assessed on are:
- Income – your level of income can influence your ability to get a credit card. For instance, most credit card companies require that you earn at least $15,000 annually.
- Job status – the status of your employment may influence your ability to get a loan. For instance, if you are in a stable job and have been for a while, you are much more likely to be approved, than if you were to have a new job, or experience lack of job stability.
- Poor credit rating/ limited credit history – your credit history can influence your ability to get a credit card since credit providers like to look at your credit history. If you have any defaults, meaning payments that you have failed to make such as bills or loan repayments, you may have trouble getting approved for a credit card.
Similarly, if you haven’t been using credit for very long, you may have a limited credit history which could equally affect your ability to get approved for a credit card.
- Previous credit inquiries – if you have made multiple credit inquiries, this can also affect your ability to get approved for a loan, as each time you make a credit inquiry it gets recorded on your credit report.
- Residency status – to credit card you will normally have to have residency status or Australian citizenship.
- Age – you will also need to be at least 18 years of age
How to use a credit card?
Once you have answered what credit card should I get and know the various eligibility requirements to apply for a credit card it’s important to know how to use a credit card so that you can get the most out of it. Here are top 10 tips on how to use a credit card:
Pay off as much of your balance the end of each month
In full if possible. This way you will avoid paying expensive interest fees
Pay for necessities rather than desires
This is important because its wiser to use a credit card to pay for things that you need rather than things that you would like to have. That’s because this type of spending pattern can lead to debt.
Don’t skip payments
Paying your credit card bill every month is incredibly important as a late payment could result in interest charges, late fees or bad mark on your credit rating.
You can use your credit card as a budgeting tool
This is a great tip for using your credit card. If you know that you will be able to use your credit card responsibly, you should make all your purchases with your credit card and pay off the full balance at the end of the month. That way you can see exactly how much you have spent at the end of the month. Then you pay off the balance with your income.
Get perks from rewards cards
A smart way to use a credit card is to use a rewards card. If you make all your expenses on your credit card you can earn rewards points on it.
Stay under the 30% credit limit
Your credit limit is the amount of money you can spend on your credit card. Though it’s always advisable to try and stay under the 30% limit to keep a low credit ratio.
Protect yourself from credit card fraud
Taking measures to protect yourself from credit card fraud is always good practice. Doing things like changing your passwords frequently, regularly checking your bank statements and using your bank’s protection services are good measures for protecting yourself against credit card fraud.
Pick your credit card due dates
Picking a date that is memorable to you is a good way of making sure to make your payments on time and avoid getting charged interest.
Avoid using your credit card overseas
Foreign transaction fees can cost up to 3% of the purchase you make. It’s better to get a travel card instead (that’s if you don’t have a rewards card).
Check your credit history
Checking your credit history regularly allows you to keep a track of how you are using credit card.
Ready to decide?
Ultimately, to decide what credit card should I get it’s important to do a bit of research. Choosing your credit card will depend on the type of credit card you want, the fees, the interest rates as well as the special features such as the services offered. It will also depend on whether you want a rewards card or a no frills card – it’s completely up to you. At the end of the day, it’s still important to use a credit card responsibly as getting into credit card debt is not a good situation to be in. Using a credit card responsibly will help you to build up a positive credit rating which is beneficial to have for many reasons.
Nevertheless, if you have trouble getting approved for a credit card, you could consider getting a personal loan. At We Find Loans, we help you to find personal loans that suit you. This way you can build up your credit rating as you repay the loan, which could help you in obtaining a credit card further down the line.