Credit cards certainly have the potential to make life a lot easier. They offer convenience and flexibility because they’re widely accepted and allow you to make purchases without carrying cash. Credit cards essentially act as short-term loans from the credit card company. And if your bill is paid in full and on time each month, you can build credit and avoid going into debt.
However, because you have the option to make only a minimum payment each month, it’s easy to let the unpaid amount roll over into future months. This is where the principal amount starts to accrue interest and can quickly send you deep into credit card debt.
Why Open a Credit Card?
First and foremost, many credit companies and community banks offer rewards and perks for using their card, such as cash back on certain purchases or points toward gift cards, airline miles, or hotels. Furthermore, good card providers closely monitor your account to protect you against fraud by flagging questionable transactions.
Plus, using a credit card responsibly—such as to pay your bills on time—is a great way to build up your credit score over time. A First State Community Bank credit card, for example, comes with many of these benefits and more.
Tips for Opening a Credit Card
With so many cards available to choose from, choosing which credit card to apply for can be daunting. With that in mind, below are some tips to help make the credit card application process easier:
1. Check and monitor your credit score.
The higher your credit score, the more likely you are to be approved for a credit card. A low credit score, on the other hand, will decrease your chances of being approved. If you aren’t sure what your score is, use a site such as Credit Karma to find out for free.
Your credit score can also impact your borrowing limit and the benefits you will receive. Many banks offer credit cards designed for new users that allow you to build your credit and work toward qualifying for higher-level cards in the future. If you’re a student, for example, don’t let your limited credit history stop you from applying for a First State Community Bank credit card.
Not much of a reader? Check out this helpful video that covers five simple steps to start building credit.
2. Take steps to improve your credit score.
No matter what your credit score is—or if you’re one of the many Americans who doesn’t yet have one—you can always take proactive steps to either improve or establish your score.
Keep in mind that your credit score is a calculation based on your credit report, which is a record of all your credit activity and a statement of your current credit status. The actual credit score is a three-digit value that’s determined by the following components:
- Payment history (35%)
- Credit card utilization rate (30%)
- Length of credit history (15%)
- How many accounts you have (10%)
- Number of inquiries into your credit (10%)
Generally speaking, the longer you have a credit card open, the less you borrow against your limit (e.g., spending $300 against a $5,000 credit limit), and the more often you pay the full amount on time, the higher your credit score will be.
3. Consider a secured credit card if you have a low credit score.
Having a low credit score or no score at all can make opening a typical community bank credit card slightly more challenging. However, there’s an alternative route to consider: opening a secured credit card.
A secured credit card is backed by cash. For example, the borrower could hypothetically give the bank $1,000 to be approved for a secured credit card with a $1,000 limit. As long as the borrower stays in good standing, they’ll get that initial $1,000 deposit back when they close the card.
Secured credit cards provide an opportunity for the holder to demonstrate their dedication to paying their bills each month. Over time, this measure helps to grow credit scores, which can help prospective borrowers get approved for a traditional credit card in the future.
4. Make an effort to shop for the right card for you.
With a solid credit score, you can start shopping around for the community bank credit card that makes the most sense for you. Some cards offer rewards and bonuses, while many of them require yearly membership fees. As you look at different options and capabilities, consider the kinds of benefits that matter most to you and which spending level best fits your financial plans.
5. Apply for one card at a time.
After you’ve finalized your credit card of choice, you can begin the application process. In general, a good rule of thumb is to apply for one credit card at a time. Financial experts suggest this because each time you apply, a credit card company will inquire about your credit, which can temporarily have a negative effect on your credit score. If you apply for several cards at once, you may get dinged with several inquiries at the same time. This can give the appearance of a lower credit score, which could hurt your chances of approval.
6. Get ready to prove you can repay.
Gather recent relevant financial documentation (e.g., pay stubs and tax information) before you apply for a card. Keep it on hand because many credit card companies ask for proof of income before making a decision about your application. Having the information prepared can speed up the approval process.
7. Always read the fine print.
It’s always important to look at the fine print before you sign anything. When reading the fine print, look for the following information:
- Understand the implications of missing a payment.
- Find out the card’s annual percentage rate to determine how much interest you would accrue in the event that you can’t repay a bill in full on time.
- See if there are any annual fees attached to the card and whether the card waives any of these fees during the first year.
- Look for limitations on how quickly you can apply to upgrade to the next tier; some companies require you to have one card for at least 12 months before applying for a higher-level card.
By studying the fine print closely and asking the important questions, you can avoid being surprised later by a detail that was hidden in the elusive terms and conditions.
Ready for Your First Credit Card?
There’s a reason that 84 percent of American wallets contain at least one credit card: They can certainly make paying for things a lot easier. The right credit card can make your life easier in many ways. With a disciplined spending approach and a commitment to paying your bills on time each month, you can build a solid credit score, which is important when applying for any kind of loan or some forms of housing. Credit is a huge part of personal finance, so make sure to stay on top of your budget and adequately manage credit card debts. You can even read our Complete Guide to Budgeting to set yourself up for success!
Need help evaluating First State Community Bank credit card options and finalizing your application? Contact us today—our team would be happy to help.
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