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5 Tips For Starting Out With Credit

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There's a lot to know about credit and ignorance can prove to be extremely costly to your pockets and your credit score. It helps to know at least the basics about credit, even before you get your first credit card. Understanding how credit and credit cards work helps you make the right decisions about choosing and using your first credit card.

Know the different types of credit card.

Even though credit cards have the same shape and size, they don't have the same terms and conditions and they're not all meant for the same type of credit card user. Some types of credit cards include standard or plain-vanilla credit cards that have no frills, student credit cards meant for young adults in college, rewards credit cards intended for more experienced credit card users, and secured credit cards for those who can't qualify for a traditional credit card. You'll be more likey to choose the right credit card if you know the types of credit cards on the market.

Credit card features should influence how you choose and use it.

Interest rate, annual fee, and credit are just a few of the important credit card features. For each credit card you consider, make sure you read the credit card disclosure which details the credit card features. Comparing different credit cards to each other will help you see which credit card features are better. In general, low interest rate and annual fees are most ideal, but not always possible when you're just starting out.

Expect a credit card statement every month.

A credit card billing cycle is the number of days between your credit card statements. Billing cycles are typically between 21 and 29 days. Each month your credit card issuer will send a statement that details your transactions for the most recently completed billing cycle. If you have an outstanding balance, then you're required to make a minimum payment toward reducing that balance. You might not get a billing cycle if you haven't used your credit card in several months.

Most credit cards come with fees.

Credit card companies make money by charging fees and interest. You can avoid most credit card fees by making different decisions about the credit card you apply for or the way you pay your bills. For example, you can avoid a late fee by making your credit card payment on time. You can avoid a finance charge by paying your full balance every month. If your credit card has an annual fee, you may not be able to avoid it.

The first credit card might be hard to get.

Credit card companies aren't always willing to give credit cards to first-time credit card users. Knowing where to apply for your first credit card will protect your credit score - if you have one - by keeping credit card applications to a minimum. If you're repeatedly denied for credit cards, even retail store credit cards, then consider a secured credit card. You'll have to make a deposit to get the credit card, but if you use it responsibly, you may qualify for a traditional credit card after 12 months.

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