What should you consider before applying for a credit card?
- Purpose for Getting a Credit Card
- Income
- Emergency Situations
Credit cards can be either your friend or enemy, depending on how you use them. If you’re the type to spend more than you earn, then the only way you can benefit from this simple, yet valuable piece of plastic is to financially change your ways for the better. Without knowing what to consider before applying for a credit card, you might fall prey to some of the most common problems that first-time credit cardholders make.
Luckily for you, this guide aims to help you come up with a more informed decision about getting a credit card. It’s not just about having the money, but it’s about using all the available financial resources at your disposal in a more responsible manner. Continue reading to learn more.
Purpose for Getting a Credit Card
First of all, you may want to ask yourself why you’re getting a credit card. Everyone has different reasons — some may want another credit option at their disposal, while some people simply just enjoy the feeling of spending without having to pay immediately. If you belong to the second category, then you may want to reconsider your reasons.
A credit card can benefit you in many ways. For example, it can actually be a great way of improving your credit rating. A good credit score can actually open you up to better financial opportunities. For example, it can increase your chances of qualifying for a loan, lower your insurance costs, or even get excellent deals on utilities and telecommunications services.
As long as you can pay off your balance and debts on time, you can very well afford to pay off your credit card dues later on.
Income
Your income is arguably the most important consideration when it comes to credit cards. When your credit card application has been approved, it simply means that the bank trusts that you have sufficient income to settle any future debts, delinquencies, and credit card balances.
You don’t need to have a job before applying for a credit card. In fact, you only need to show the bank that you have a consistent source of income that you can turn to. These may be your investment returns, retirement fund distributions, liquid assets, rental income, unemployment benefits, or other sources of passive income.
In many ways, your income serves as proof that you can pay all expenses that you might accrue with your credit card. If your application gets rejected, then use it as a learning experience to further grow your income.
Emergency Situations
Emergencies happen unexpectedly, and this is also true for financial emergencies. This should also be one of your considerations — a credit card may be a good lifesaver in such cases where you don’t have sufficient income to settle an emergency balance.
Credit cards can make a great supplement to any already-existing emergency fund that you have. It can help you temporarily pay costs that may arise from medical emergencies, major house repairs, car repairs, or an unexpected layoff.
Key Takeaway
Hopefully, this short guide has taught you a little bit about what to consider before applying for a credit card. As mentioned before, a credit card is not just something that you get, just because. More likely than not, you have good reason to decide on getting one — you just need to make sure that you have the financial capabilities to manage everything related to your credit card ownership.
Want to learn more about credit cards? You may want to turn towards one of the country’s leading entrepreneurs, Benito Keh. With his business acumen and financial wisdom, you’ll certainly make only the best choices on your finances. Click here to learn more.
