Here are some more questions that were asked by young adults who have never had a credit card.
APR stands for annual percentage rate. It’s the rate of interest that you’ll pay over the course of a year if you carry a balance on your credit card account.
The monthly periodic interest rate is the rate that you pay on your balance on each credit card statement. You can find your monthly periodic interest rate by dividing the APR by 12.
So if your annual percentage rate is 24%, your periodic interest rate is 2%.
There’s also a daily periodic interest rate. You can calculate that by dividing your APR by 365.
Since the bank issuing the credit card wants to be sure it gets its money when it extends you credit, proof of a steady income is probably the most important qualification. If you’re married but not working, you might be able to qualify based on the income of your spouse.
If you’re under 21, you’ll have to prove that on your own you earn enough to make payments on a credit card. Otherwise you’ll need a co-signer on the account.
You can have as many credit cards as you can get approved for. But you need to ask yourself why you’d need more than two or three, especially if you’re tempted to use them all. Having too many cards could be a good way to get yourself buried under credit card debt.
How many credit cards should you have? Maybe one that you use all the time, and a spare or two in case you lose that card and/or have some kind of emergency expense that you have to charge. Just be sure to use your backup cards occasionally so the bank doesn’t cancel them for non-use.
No—but you do have some options if you’re concerned about going over your limit (and having to pay the fees that the bank charges when you do so).
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which went into effect in 2010, set up the rules for over-the-limit transactions. Unless you specifically tell the card-issuing bank that you want to be allowed to exceed your credit limit, you won’t be allowed to do so. Your credit card will be declined if a transaction would push it over the limit.
You can opt out of the over-the-limit rule; you just have to tell your credit card company. In that case, your credit card won’t be declined—but you could end up paying some hefty fees for exceeding your limit.
Most of the big credit card issuers will allow you to set up automatic payments. That means they’ll take whatever amount you designate—the outstanding balance, the minimum payment, or some other sum—out of your bank account on the date that you choose.
But don’t confuse a credit card with a debit card’s credit option. When you choose credit when using your debit card, the money is taken out of your account automatically and usually within a business day. With a credit card, you have to go through a process to set up withdrawals from your account, and those withdrawals are made only once a month on the day you designate.