A credit card is a big deal to young adults. It's one way for them to feel like they're part of the grownup world. But credit cards can also be a way for a youngster to get themselves into serious adult trouble before they're ready for it. That's why it's important to follow a few important—but luckily simple—steps when shopping for your first credit card.
1. Shop Around
One of the first things you should know about getting your first credit card is how to shop around. Sure, you probably get a few dozen credit card offers in the mail every month. And every time you go to a ballgame, somebody offers you a free beach towel if you join their credit card. But these offers may not be the best. Try doing your own research on the Web to find the best credit cards for your situation.
2. Compare Annual Percentage Rates
Once you come up with a list of cards you may want to apply for, compare their interest rates, or the percentage fee they charge you for debt left on your card every month. It's important to know the difference between variable rate cards, and fixed rate cards. Variable means that the interest rate can change over time, so it may start out extremely low, but in six months, it could triple, quadruple, etc.
3. Compare Fees and Grace Periods
Don't just compare interest rates on cards either. You should know each card's annual fee, grace period (or time they give you to pay off each month's charges), late-payment penalty fees, over-the-limit penalty fees, and charges for cash advances. Of course, for these penalties and cash advance fees, you hopefully will never have to experience them firsthand. But it's still important to know what they are just in case.
4. Read the Fine Print
Also read the fine print of any credit card deal. Some cards offer great interest rates, fixed or otherwise, but warn that these low rates disappear as soon as you make one late payment. Credit card companies put this and many other loopholes in their contracts to make the most money off a person with too much debt and too little responsibility. Be aware of them so you can avoid them.
5. Review the Agreement
Once you figure out which card you want and apply for it, you should get the card and the full agreement in the mail. Make sure you review this agreement completely to make sure that you're getting everything you agreed to—the right interest rate, spending allowance, etc. These things can change during the card's approval process.
Joshua Shapiro recommends Find Credit Cards to find an
American Express credit card application that's right for you.
