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If ever you are thinking of getting a credit card, think it through. This tiny plastic gives you the power to afford to buy things but with consequences and unspoken drawbacks. Using it irresponsibly may put you in a long-term struggle to pay; doing otherwise will give you so many benefits for being a responsible user and payer.


What is a credit card?

A credit card is a tiny piece of plastic card offered by financial institutions (usually banks). It allows clients to borrow money to pay for goods and services where credit cards are accepted as a mode of payment. 


Who can avail of a credit card?

Credit cards are often offered to people who are:


  1. employed
  2. have a good standing credit history (if one already has other credit cards) or are active users of their bank accounts (for first-time credit card applicants)
  3. have the capability to pay (banks usually have a set gross annual income requirement to be eligible to apply for a credit card) 


Where and how to apply for a credit card?


If you have a bank account, the easiest way to apply for a credit card is through the bank where you have a deposit account. Check the credit card products that your bank offers. These credit cards are tiered and require different sets of qualifications (particularly on the gross annual income requirement).


You may also check for credit card products from other banks, however, getting approved may be more difficult if you are a first-timer. 


If you are not qualified to get a credit card, you can still be eligible for a supplementary card if one of your family members has a primary credit card where you can be linked as a supplementary user.


What are the requirements if you are going to apply for a credit card?


Usually, banks ask for the following when you apply for a credit card:


  1. Basic profile information.
  2. Employment status and gross annual income
  3. Tax Identification Number
  4. Copy of Valid IDs

These may also be validated by an agent from the bank through call and will also be the main basis to get approved for a credit card.


What are the best credit cards for first-time users?


I cannot recommend which credit card is the best as I believe all credit cards have features that cater to different markets i.e. rewards points, travel perks, discounts, etc.


However, I suggest starting small -- experience and learn how to responsibly use a credit card first, build a habit of paying on time and then eventually consider the perks of having a credit card.


Ask yourself: Do I really need a credit card?


You must understand why you need a credit card, why the extended line of funds that it can provide is important to you, and how you plan to use it. You must also understand if you will be capable to pay for what you use in that credit line. Doing so will make it easy for you to be mentally ready about the perks and disadvantages of using one. 


A credit card can be used as good as cash, however, not using it carefully may subject you to financial problems and unwanted additional expenses especially if you have a very limited source of funds to pay for your credit line.


Credit Card Vocabulary

Before getting a credit card, make sure that you understand the following terms ad how they play in your use of a credit card.


Credit Limit- The maximum amount you can use from the credit line of your credit card.


Minimum Payment/Amount Due - the amount you must pay on or before your monthly due date 


Installment Payment - gradual, monthly payment of borrowed fund 


Monthly payment due - the set payment of an installment purchase that is divided equally in 12, 24, 36 months tenure of payment. 


Finance Charge - also called a penalty. This is the interest you borrowed but unpaid funds accrue when you do not pay on time or in full.


Card Straight - a term used when you purchase goods or services in a one-off charge to your credit card.


Statement or Billing Date - the day when all purchases within the last 30 days made through your credit card was generated.


Due Date - the day when you need to settle payment for the current charges on your credit card.


Cash Advance - a debt that is allowed to be loaned from your credit limit.


Interest rate - a percentage that is charged on top of your cash advance loan or unsettled credit card charges.


I hope this blog entry helped you at least a bit to know things about credit cards. There may be so may other things that you must know about credit cards and I suggest you do your research to understand more about this (also, read the terms and conditions of using a credit card product!)


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