The Do’s and Don’ts of Opening a Credit Card

Posted by Pekin Insurance on Jul 08, 2016

Cash or debit cards are the norm when it comes to how consumers pay for items, but today credit card offers are everywhere you turn. While it may be tempting to open that store credit card for the extra discount, that can lead to problems later if the impulse wasn’t carefully thought out. How you use a credit card affects your credit score, which determines your acceptance for things like applying for loans, jobs, apartments, and more. Here are the do’s and don’ts of opening a credit card.

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Do Research Your Options

Sure, that extra store discount for opening a credit card is great for that purchase, but what else will it give you in the long run? Knowing the benefits of your credit card can give you an idea of how much it will habenefit you in the long run. Cards with cash back or mileage can help you pay for other purchases or travels in the future. Beyond that, reading reviews and knowing whether your card is accepted in other countries or at the stores you frequently shop is good to know as well.

 

Do Figure Out Your Approval Odds

Whether you get approved or not for the credit card, a hard inquiry will be placed on your account. Be smart about which ones you choose to apply for as being rejected can hurt in more ways than one. For students who don’t have credit built up yet, there are many student credit cards out there specifically geared to students with low credit scores. As for those who have lower credit scores and are not students, there are credit cards with little to no rewards that allow you to build up your credit.

 

Do Open One to Raise Your Limit

Keeping your credit utilization low helps raise your credit score; using too much of your credit limit can look risky. If you have a $3,000 credit limit on your card and are constantly hitting $2,500, your credit usage is very high. This is when you want to consider asking for a limit increase from your company or look into another card.

 

Don’t Open Multiple Cards in a Short Amount of Time

Unless you are preapproved for a credit card, then you will get a hard inquiry against your account. A hard inquiry is when a lender or credit card company checks your report before making a decision regarding your application. This can affect your credit score, and having multiple hard inquires in a short amount of time can drastically lower your score.


Don’t Write-off Cards With Annual Fees

Sure, no one likes to pay annual fees, but if the rewards pay for the annual fee and more, then you might want to consider the pros and cons. Sometimes paying that fee may not be worth it, but you have to look at your spending and budget to see if it works for you.


Don’t Go Crazy

While it might be easy to get carried away spending more now that you have a higher credit limit, you need to show credit card companies that you can handle the new responsibly that comes with a credit card. Keep to your old budget and be smart about purchasing decisions.


Do Use a Credit Card Over Your Debit Card

When credit cards are stolen the turn-around time for fraudulent charges is quicker, whereas if your debit card is stolen, thieves have the ability to pull money directly from your account. Plus, using a credit card helps to improve your credit score, which in the long run will get you lower rates on your loans, improve your chances of acceptance into apartments, and show potential employers that you know how to manage money.

 

IDT911 has partnered with Pekin Insurance and is offered as an endorsement to your homeowners or renters insurance. Should your identity be stolen, they know the appropriate steps to take to get your identity theft resolved. Be smart about where you give out your information and consider what a credit card can do for you!

 

 

  

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