8 things students and young professionals should know, before applying for a credit card

Hemalatha Y. N.

As a student or young professional, it's essential to understand the ins and outs of credit cards before applying for one. A credit card can be a powerful tool for building credit, managing finances, and earning rewards, but it's very important to know the facts before signing up.

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1. Why do you need a credit card?

Are you planning to use the credit card for books, travel, entertainment, food, emergencies, or other purposes? Remember, each time you make a purchase using your credit card, you are essentially borrowing money from the credit card issuer. It is not extra or supplemental income to rely on when you can't afford something.

2. Credit score

Your credit card totally relies on your credit score. It acts as a base for knowing your eligibility. Make sure to check your credit report and work on improving your credit score if needed.

3. Interest rates

Understand the interest rates with your credit card to get a clear picture of the charges and fees. Opting for a card with a lower interest rate can help you save money on interest payments over time.

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4. How does interest work?

Understand how interest works. Every credit card has an Annual Percentage Rate (APR) of interest attached to the account. The higher the APR, the more expensive any debt you carry from one month to the next will become due to financing fees.

Credit card interest compounds, meaning any debt accumulating financing fees will have interest added. Review your transactions carefully not only to ensure their accuracy but also to gain knowledge about your spending habits.

5. Payment terms

Make sure you understand the payment terms and are prepared to pay your bills on time. Late payments can result in penalties and harm your credit score.

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6. Rewards and benefits

Benefits offered by different credit cards. Some cards provide cashback, travel points, or other discounts that may be beneficial to you.

7. Foreign transaction fees

If you travel frequently, consider looking for a credit card with no foreign transaction fees to save money.

8. Credit card agreements

Before signing up for a credit card, read the fine print of the credit card agreement and fully understand the terms and conditions. Ensure you are comfortable with the agreement before proceeding.

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