Credit cards are a fact of life. The first credit voucher was issued in the UK in 1880, when a clothing company issued coupons which could be exchanged in approved shops or when a salesman called at the customer’s home. The first actual cards were issued by Western Union in America in 1914. They were made of metal, and only issued to preferred customers, but the first universally accepted credit card was the Diners Club card, first issued in 1950 and, as the name suggests, designed for people to use in restaurants. Initial membership was 200, but by the end of the same year 20,000 cards had been issued. American Express entered the market with a travel card in 1958 and introduced the first plastic card a year later. The first all purpose credit card was the brainchild of The Bank of America in 1966 and Barclays Bank in the UK quickly followed with the Barclaycard.
Everyone has a plastic card
In the fifty or so years which have followed, plastic cards have completely revolutionized the way we pay for goods and services. Most people use a card for at least 50% of their purchases, and the card issuers have developed more and more sophisticated offers, to entice us to hold and use their cards. With the huge rise in internet shopping, and the phasing out of checks, currently proposed for 2018, even more people will be turning to credit cards to help them manage their money and do their shopping efficiently. So it’s perfectly natural that you should want at least one!
There are more and more credit card companies, institutions and banks, all offering you a good-looking deal on a new card. And although they all look similar, they aren’t, so it’s important to find the right card for you. Once you’ve decided to apply for a credit card here are a few tips to help you.
Check your credit rating
If you access your own credit record online, using a site such as Experian, Credit Check Instantly, or Equifax, your query won’t affect your credit rating. However, if you apply for a card, the provider will check it and if they decide it isn’t good enough and turns your application down, this will have an adverse effect. So will applying for a number of credit cards over a short period of time. If one company turns you down, the chances are they all will. So don’t ask for trouble by applying for a card if your rating is poor. Your credit rating can improve relatively quickly, so it might be worth waiting while you complete an existing hire purchase agreement, notch up another year in your job, or simply get a year older! Consider instead options such as pre-paid credit cards, which don’t require a record, and which still allow you to manage purchases over time, and avoid having to carry cash around.
Consider opening offers
Lots of credit card companies are now offering incentives to you to entice you to sign up. Low introductory rates, even 0% balance transfer offers, cash back and rewards are all out there, and it’s tempting to go for the ones which offer you the most purchasing power! But you need to be careful when you compare cards, and make sure you have considered all the criteria. For instance, a low APR may be offset by higher fees, rewards may not be suitable or accessible to your particular spending patterns or lifestyle choices.
Understand the terms
When you apply for a credit card read the small print and make sure the offers will deliver what you want, Check the timing of interest-free terms, and the revised rate after the term ends, if you’re still going to have an outstanding balance. Look carefully at annual fees and costs associated with 0 balance transfer cards, and if they’re going to apply to you, make sure you’ve accounted for them. Beware missing payments or being late with them, even if it’s down to bank transfer times or postal delays, late payments can often incur heavy penalties, and may even result in a 0% interest-free period being terminated.
It’s tempting to look for the card with the lowest APR and in many cases, this is the best indicator of a good card. However, again be sure that the low rate isn’t offset by other charges, and also that if it’s only for an introductory period, the rate doesn’t go sky high later.
Do your math
As with everything that involves your money, when you apply for a credit card, it pays to do your homework. Look carefully at your planned spending, and work out how much the interest and fees will add to the cost of your purchases. If you work with short terms where you pay off purchases quickly, a 0% balance transfer card will save you the most money, however if your balance will take longer to clear, a low interest rate over time will be kinder.
Maximize the rewards
As more and more cards are issued, providers are being more and more imaginative with the rewards they offer. You can find cards which will offer you discounts at your favorite store chains, airfares to dream destinations, hotel accommodation, fuel discounts, cash back and points schemes which rack up as you spend more on your card. Consider your lifestyle and spending habits, and choose a card which will really save you money. Changing your plans and spending more just to receive rewards means your card is using you, not the other way around!
Finally, as you apply for a credit card, just remember that although handing it over the counter seems like the easiest thing in the world, it’s still spending. You know it is. So, before you hit the high street, have an idea of what you can really afford, and don’t forget to include the costs of using the card. Then keep an eye on your statements, pay on time, stick to your planned schedule for paying off balances, and enjoy the rewards. You’ve earned them.