Having a credit card is one of the most convenient and safest ways for you to transact while in the US.
As an international student or worker, getting your first credit card can be a rewarding feeling, but you have to know how to properly use it. With things like credit limit, credit score, annual payments, and more you need to remember, it can be quite overwhelming. This article will help you understand how important using credit cards in the US is and tips on how to properly manage your card.
What is a Credit Card?
A credit card is your ticket for making purchases with ease and safety. It’s simply described as some sort of tool that allows you to borrow money with a certain limit to purchase things you like and then pay it later, typically within a month.
This is the opposite of a debit card where you take money directly from your bank account. Whereas a credit card lets you use the bank’s money, and then pay the bank back.
Here are some important terms you should remember:
- Credit Limits: When acquiring a credit card, the bank gives you a credit limit or the maximum amount you can spend for a month. You can increase your limit when the bank sees you’re paying your dues on time and in full, or you can request an increase.
- Billing Cycle and Payment Due Dates: Every month, you’ll receive a statement of account showing all your purchases and the total amount you owe. You have a specific date to pay at least the minimum amount due, but it’s always recommended to pay in full.
- Interest Rates: If you don’t pay in full by the due date, interest charges will apply to the remaining amount.
- Minimum Payments: You’re required to pay at least a small portion of what you owe each month. Your statement will reflect that. Paying just the minimum can lead to high interest charges that average at around 27.65%, so it’s best to pay in full always.
One thing you should remember as well is that credit cards can be very useful for building your credit history and gaining a good credit score. This is important for things like renting an apartment or buying a car. However, it’s important to spend wisely to avoid falling into debt. Think of your credit card as your tool that, when used responsibly, can make your financial life easier and more secure.
Types of Credit Cards
In the US, there are plenty of credit card types that you can take advantage of. Each card is tailor-made to cater to different needs and lifestyles. You must understand each type as it can help you in choosing the one that suits your needs and habits. Here are some of the most popular ones:
Secured Credit Card
A secured credit card is mainly designed for people who have no credit history or low credit score. They require a cash deposit which will serve as your collateral and your credit limit. Minimum deposit requirements range between $200 to $300, depending on the bank. This card is your best option for building your credit history if you’re new to the US, and can open up more opportunities to apply for higher reward cards in the future.
Unsecured Credit Card
Unsecured Credit Cards are the most common type of credit card and don’t require a deposit. Your credit limit is determined by your creditworthiness, which is a measure of how likely you can handle your financial obligations. They offer a variety of rewards and benefits but require a good credit score to qualify and a set number of points.
Rewards Credit Card
These are special credit cards, offering points, miles, or cashback for every dollar spent. Rewards can be redeemed for travel, merchandise, statement credits, or gift cards. These are ideal for people who pay off their balance in full each month and want to earn perks for their spending. You can earn rewards with a secured or unsecured card, depending on the financial institution.
Student Credit Cards
Designed for college students, these student credit cards typically have lower credit limits, no annual fees and offer benefits like cashback on purchases. They are a good starting point for young adults and international students trying to build their credit history.
Moreover, there are fintech companies, like Adro that offer credit card accounts. You can seamlessly open a checking account from inside or outside the US by using their app. Once you’ve established your checking account, you can then open a credit card account so you can start building your credit score as you arrive in the US.
Store Credit Cards
These cards are issued specifically by retailers and can only be used at their stores and even online websites. They often come with special discounts, rewards, and financing offers. However, they tend to have higher interest rates, so keep that in mind if you decide to apply for one.
How to Apply for a Credit Card
Applying for a US credit card is relatively simple, but it’s still important to be prepared to make sure you have the right card for your needs. Here are the steps you should remember when applying:
Assess Yourself First
Before you apply, evaluate your financial standing. Consider your current income, if you currently have existing debts, and if you can manage your credit card responsibly. This is an important step as it helps you to choose your ideal credit card and limits the risk of debt piling up.
Research and Compare Credit Cards
There are plenty of credit cards available for you to choose from, each with different features, fees, and benefits. Take the moment to think about the more important features, including low-interest rates, rewards programs, no annual fees, or a card that helps build credit.
You can even use comparison websites to evaluate different cards and read reviews to understand their pros and cons.
Prepare All Necessary Documents
When applying for a credit card, you need to provide your data to your financial institution. The more common ones to present are:
- Proof of Identity: This includes your passport or driver’s license.
- Social Security Number: You can also use your Individual Taxpayer Identification Number (ITIN)
- Proof of Income: Statement of accounts, pay stubs, tax returns, etc.
- Employment Details: This may be an optional requirement only if you’re an international worker.
Proceed With the Application
When you finally have the complete documentation, you can now proceed with the application. You can apply for most credit cards online, by mail, or in person at a bank. Common application steps include asking for your personal information, including your name, address, income, and employment status. Make sure that you’re truthful and accurate in your responses to avoid delays or denial.
Submit Your Application and Wait for Approval
Once you’ve completed the application and reviewed the terms, submit it and wait for approval. The time for approval may take up to 30 days, depending on the speed of review. Although online applications typically provide faster approval than in-person applications.
Activate Your Card
If your application is successfully approved, your credit card will be delivered to you via mail. The card comes with instructions on how to activate it, whether it’s using an SMS text or using the financial institution’s app or online website.
Tips for Using Your Credit Card Responsibly
Understanding how to use your credit card responsibly is the key to having a good financial standing and excellent credit score. Follow these tips so you can manage your credit card well:
Keep Track of Your Expenses
Monitoring your credit card transactions is an important tip. Many financial institutions offering credit cards offer online banking and mobile apps that allow you to track your spending in real time. This allows you to easily monitor everything and helps you stay within your budget and avoid overspending.
Pay Your Bill on Time and if Possible, in Full
Always pay your dues before or during the due date, and if possible, pay in full. Late payments and paying the minimum amount can result in extra fees, higher interest rates, and accruing debt if left unattended.
Avoid Maxing Out The Credit Limit
Try keeping your credit balance well below the maximum limit. It is always bad practice to use a high percentage of your available credit and it may affect your credit scores. Aim to use no more than 30% of your credit limit at any given time.
Review Your Statements
Frequently review your credit card statements to make sure all charges posted are accurate. If you see any suspicious or unauthorized transaction, report or call your card issuer immediately. This helps protect you from fraud and errors. This is the reason why paying using credit cards is safer because nowadays, credit cards have zero fraud liability on unauthorized charges.
Protect Your Credit Card Information
Always keep your credit card information secure. Avoid sharing your credit card details over the phone or online unless the source is trustworthy. Use trusted and proven websites for your online purchases and remember to be cautious about storing your credit card details on different platforms.
In conclusion, using a credit card can be very beneficial in building your financial standing as you continue living in the US. But, always remember to use your credit card responsibly, keep track of your expenses, and pay your dues in time to avoid costly debts and high interest rates. By learning its importance, you can truly harness the amazing benefits of having credit cards in the US, in which you can pay for everything more conveniently and enjoy rewards for your responsible use.
