Some might say getting your first job marks the start of #adulting. That’s true, but another indicator that you’re stepping into adulthood is this: getting your first credit card. Owning a credit card means more financial responsibility, but that also means you’re financially savvy — that is, if you know what to expect from the onset.
There are lots of cards in the market and each comes with its different perks. However, before you worry about which card you should get, it’s important to first get your basics right. Here are some things you need to know before you apply for your first card.
1. How do credit card fees work?
Each month, you’ll get a monthly statement and the minimum amount you’re expected to pay. This amount is usually a percentage of your credit card balance or a fixed amount. If you miss the payment period or simply don’t pay at all, you’ll get a hefty late payment fee.
Paying your bills in full and on time is key in avoiding extra fees. While it’s not against the rules pay only the minimum amount, avoiding paying your bills in full means paying more in the long run.
2. How many credit cards can I own at a time?
As many or as few as you want. There are no limits to the number of credit cards you can own. If you’re interested in a few cards from a particular bank, simply apply for them! However, your credit limit will be shared among the different cards you now own.
If you’re thinking of applying for a different card from a different bank, you can do that too. More paperwork will be involved but you’ll increase your total credit limit by having cards from different bank accounts.
There’s no stopping you from applying for a few cards but managing different cards can be tricky for beginners. Each card will have its own billing cycle and it can be a hassle having to keep track of all of them so you pay your bills on time. Just as we mentioned earlier, missing your payment means getting slapped with a late fee and nobody wants that.
3. Do I meet the requirements to apply for a card?
This depends on the card you’re interested in applying. Entry level cards generally require you to have an income of at least $30 000 p.a. On the other hand, high-end cards with better perks will naturally require you to have a higher level of income. Most cards require you to be at least 21 years old, however, if you’re thinking of applying for a student credit card, you only need to be 18.
4. So What Is A Student Credit Card
Student credit cards don’t have a minimum income requirement but its credit limit will be much lower, usually at around $500. Depending on which student credit card you’re applying, only students of certain institutions are eligible for certain cards.
5. Do I need a bank account to have a credit card?
No, you don’t! Credit cards give allow you to get short term loans from the bank. You’re not spending money from your own account when you pay with a credit card, so you don’t need to have a bank account with the bank to own a card. However, you do need to pay back what you owe the bank at the end of the month and you can do that through online banking, cheque, or at an AXS station.
You must be thinking, “wait, how can I pay my credit card bills through banking if I don’t have a bank account with that bank?” Let’s say you’re thinking of getting a DBS credit card but don’t have a bank account with them. Instead, you only have a bank account with OCBC. You can still go ahead and apply for that DBS card but pay the bills through your OCBC bank account. There’s no need to open an account with DBS just to pay your credit card bills.
6. Can I draw money from the ATM with my credit card?
Yes, you can. However, it’s better to draw cash from the ATM if you have a bank account linked with your credit card. If you don’t have a bank account linked, drawing from the ATM essentially means drawing cash advances with your card. Interest is charged directly on the amount you’ve drawn as you’re borrowing from the bank against your credit limit. Interest rates are higher and additional fees will incur.
Getting your first credit card is really an introduction to managing your finances. Although there have been many credit card horror stories, credit cards are not intrinsically bad. If you learn how to manage your finances and understand how credit cards work, you’ll be able to avoid debt from compound interest and fully enjoy the perks that come with using credit cards!