Getting a Credit Card? Here’s What You Need to Know

A credit card is a big financial step, but one with all sorts of benefits to reap if you use them wisely! If you don’t use them wisely, it can make it really hard to borrow money in the future. Getting the right kind of card for you can help you build credit, save money, travel, or a number of other perks. If you’ve been considering one, here’s what you need to know.

The Basics

A credit card is any kind of plastic or metal card that lets you access a line of credit offered by the bank that gave you the card. Every time you swipe this card, you’re borrowing money from the bank, and you pay that money back at the end of the month.

When you’re approved for a credit card, the bank that approves you authorizes a credit limit, or the maximum amount of money you can borrow, to use at your own discretion. This limit will depend on a lot of different factors, such as your income, debts, and the limit on other credit cards you may have.

After using your credit card, you’ll get a bill toward the end of the month, and you have a few choices. You can pay a certain minimum amount, pay the whole balance in full, or pay some amount in between those options. Paying the minimum is, of course, less expensive in the short-term, but it’s more expensive in the long-term due to paying credit card interest. Paying in full is the ideal option, because there’s typically a grace period that allows you to avoid interest altogether.

Your credit score is a three-digit number indicating exactly how safe or how risky it would be to lend you money. The better your credit score, the easier it will be to borrow money from a bank in the future. Your payment history—your history of using your credit card and then paying the bills—counts for 35% of your credit score. To avoid any damage to your credit score, pay at least the minimum amount owed by the due date every month, or ideally pay it in full.

Types of Credit Cards

There are a lot of different kinds of credit cards out there, so it can be hard to choose, but reviewing the benefits and knowing your credit score will help you make an informed decision.

Rewards cards are credit cards that give you something back for each purchase. Cash back, airline, hotel credit, general travel cards, or store credit cards are all options with great benefits.

At Peoples Bank, we offer a Platinum Cash Back Card that rewards customers with 1% cash back on all purchases. This is a great card option for those that intend to pay the outstanding balance off each month. Our cash back card has a low annual fee and 0% interest on purchases and balance transfers for the first 7 billing cycles.

Low interest cards have their own benefits—while you won’t receive any rewards after purchasing, a lower interest rate can be really helpful with big purchases. With our Platinum card, you get a 0% introductory APR for the first 7 billing cycles and on balance transfers, which gives you time to pay off that large purchase with no interest at all.

Using credit cards for a balance transfer can also be a great way to save money. When moving the balance from one card to another, you need to be aware of any balance transfer fees associated. However if the interest savings is greater than the fee, it is definitely something to consider. Typically this fee is a minimum dollar amount or a percentage of the amount being transferred. At Peoples Bank, our fee is $5 or 3% of the balance transferred (whichever is greater). It's very important to know how much it will cost you vs how much you may save and to get an accurate calculation. Check out this calculator to see if making the switch is worthwhile.

If you have never established credit or have poor credit, there are still options for you! The best thing to do is talk with one of our local loan officers to determine the best solution for your situation.

Tips for Smart Credit Card Management

Pay your bill on time, and pay it in full if you can. This sounds simple, but without immediate consequences it can be tempting to overspend or pay something off over time. Hop online weekly to review your account; not only can you track your spending, but this also helps you avoid fraud. Again, without immediate financial consequences, it’s even more important to budget carefully with a credit card.

For more trusted financial advice, contact Peoples Bank of Alabama today!