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5 Things to Know Before Getting Your First Credit Card

5 Things to Know Before Getting Your First Credit Card

    #finance

    #lifeskills

Suzie Brooks, Children's Aid Foundation of Canada

Aug 25th

It may feel scary taking the step to apply for a credit card. It can be intimidating thinking about credit scores, interest rates, and even fraud. A credit card can be a good thing to help build your credit score, which can help you apply for things like an apartment, a phone plan, or a car loan. We at Fostering Community have found 5 tips to help you feel informed and confident in your decision to get a credit card: 

Get a Beginner Card

When you first apply for a credit card, it is likely that you are a student or young adult. If you are a student, there are often great promotions with your bank to apply for a student credit card. A limit of $1,000 is a good starting point for students and young adults. Having a smaller credit limit can help you learn how to best use your credit card without spending more than you can pay back.

Know the Fees

Try your best to familiarize yourself with the fees of the credit card that you want to apply for. You can review any annual fees, interest rates, and the maximum credit limit, online or with your bank before applying. Check out TD Credit Cards for Students in Canada to see an example of different annual fees and interest rates:

Student credit cards at TD bank with annual fees and interest rates. 

There are beginner cards without any annual fees, so be sure to consider these options for your first credit card.

Managing Your Credit Score

To maintain or raise your credit score, follow some of these tips from Nerdwallet:

  • Pay off your card before the due date
  • Pay more than the minimum payment
  • Avoid reaching your credit card limit
  • Only buy what you know you can pay back

Nerdwallet recommends keeping your balance under 30% of your available credit at all times. This means if your credit limit is $1000, you should only  spend up to $700 before paying your credit card off.

You can check your score for free at Credit Karma.

Paying off Your Credit Card

Financial advisors recommend that you pay more than the minimum payment each month. The less you pay now, the more you pay later. If you do not pay it back, the amount currently on that card will accumulate interest each month until it is paid off. This can turn into a larger problem like your credit score going down or your credit card being cancelled. 

Credit Card Fraud

Credit card companies have plans in place for fraud, so you don’t need to feel concerned about losing your money. If there is an unauthorized purchase on your credit card that you did not make, report this to your credit card company. You will likely not have to pay because your liability for unauthorized credit card purchases is minimized through zero-liability policies of credit card networks like Visa and Mastercard, generally bringing your liability down to $0.

There is a lot to think about when taking the step to get a credit card. By keeping informed of the risks and benefits, you can use your credit card to build your credit. You can also book an appointment with a financial advisor at your bank to talk through any questions that you have. 

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