Getting a Credit Card for the First Time

You probably get a credit card offer in the mail almost every day. Be careful before signing up. You need to read the fine print carefully. Remember that what you're signing is a legally binding agreement between you and the credit company. You're agreeing to pay back the company on their terms. So you need to know what the terms are! Here are some things to look for:

  • The interest rate. Some will offer in big letters on the envelope an outrageously low interest rate. Often that's called a "teaser", introductory, or promotional rate. This is a very low rate of interest that only lasts for a short period of time (like 30 to 90 days) and then it's jacked up to a much higher interest rate of 15, 18, 21% or more. If you don't look at your bill carefully you may not notice the jump in interest charged until your debt has accumulated substantially. Cards can also carry different interest rates for purchases and cash advances.
  • Fees. Credit cards can charge annual fees, cash advance fees, and late fees: (1) Annual fees. This is a fee charged for just having the card. Some cards charge no annual fee. Others can charge $35, $50 even $100 just for the privilege of using the card. These fees are automatically added in to your monthly bill so you may not notice if you're not looking carefully. (2) Cash advance fee. The fee charged for withdrawing money from a bank or ATM charged to your credit card. You are typically given a cash advance limit less than your total credit limit and may be charged a higher interest rate, in addition to a fee, for using the cash advance privilege. (3) Late fee. If you are late, or delinquent, in making your payment, you will be charged a fee and your APR may also be raised.
  • Credit and Cash Advance Limit. How much is the maximum you're allowed to charge, or borrow, using the card? How much cash are you allowed to withdraw using the card?  Many credit cards will now offer additional benefits such as online access where you can check your account on the Internet, free gifts when you open an account, and perks like earning frequent flyer miles or offers for services like insurance policies. There are several ways to find a credit card - through your local bank or credit union; online; or through a mail offer. Depending on whether or not you have used credit in the past you will be offered a secured or unsecured line of credit. A secured credit card means that you'll need to give the bank or company a deposit of up to a few hundred dollars. If you fail to pay your bill they'll take money out of the deposit to make the payment. An unsecured credit card means you won't be required to make a deposit as a guarantee of payment.
  • Ideally you want a credit card with a low guaranteed interest rate, no deposit required and no annual fee required for using the card. For more information on applying for, and comparing credit card interest rates check out the following websites: