Getting a credit card can certainly be empowering. After all, it can give you access to a wide array of benefits such as the convenience of cashless payments, flexible payment options for large transactions, and being able to earn rewards for your everyday purchases.
Despite all these perks, that doesn’t mean you should just go and apply for a credit card without thought. Indeed, if you’ve been wondering about getting a credit card, it would be in your best interest to stop for a while and think. You might want to search the internet for “first-time credit card application Philippines” to gather insights from experts and fellow consumers. Additionally, here are some crucial factors you should consider before getting a credit card:
1. Your Source of Income
During the application process, one of the key details that a credit card provider will look for is a stable source of income. This is to ensure that you’ll be able to make payments for your monthly balances. Thus, if you currently don’t have a source of income—whether you’re unemployed or on a working arrangement that makes your income stream unpredictable—then consider holding off from getting a credit card. Adding credit card bills on top of your current expenses can easily overwhelm you if you don’t actually have a reliable means to pay.
The amount of your income is also a deciding factor in getting your credit card application approved. Even if you do have a steady source of income, if you’re not earning enough to pay off your bills, then a credit card might not be suitable. Different card types also have different monthly or annual income requirements, so do check first in case you’re aiming for a specific credit card.
2. Your Spending Habits
If you find yourself consistently spending beyond what you can truly afford, then a credit card may not be the right choice for you. While it can be a helpful financial tool in the right hands, credit cards can just as easily lead to financial troubles and debt if used for reckless spending. As such, evaluate first if you’re responsible enough to maintain a card that allows you to make purchases quite literally anytime and anywhere. If you think it’ll just enable you to keep buying without careful consideration about what happens next, then work on fixing your spending habits first.
An excellent way to improve your spending habits is to set a strict budget for various spending categories. Tally your bills, groceries, rent, and other necessities and pay off these expenses as soon as your income arrives. Then, allocate a fixed amount for leisure spending. Once you’re able to diligently stick to the budget, only then can you consider getting a credit card.
3. Your Outstanding Debts
Paying off debts can take a huge chunk out of your current income. Moreover, if the debt had already accrued a large interest over time, you’re looking at paying more than what you initially borrowed. Hence, consider all your outstanding debt first. If the payments you’re making are manageable and you don’t feel like you’re constantly having to make ends meet, then you may be able to afford maintaining a credit card. If not, then pay off your debt first to free up your budget.
In the same vein, you should also consider any ongoing loans you may have. If you’re already struggling to pay your car loan, home mortgage, or other financial obligations, then adding a credit card into the mix could just lead to more unstable finances.
4. The Interest Charges
Ideally, you’d want to pay your credit card bill in full every month to avoid interest charges. That said, emergencies do happen and there may be times when you may not be able to make the monthly payment. In such cases, you’ll have to pay more in the next billing period because of interest charges.
Look into the interest rates and penalty fees of the credit card you’re planning to get and evaluate if these are manageable for you should such a scenario happen. If they seem too high, then it might not be the right credit card for you; as an alternative, you can wait until you’re in a better financial position before applying for the card.
5. Your Personal Financial Goals
Before you consider getting a credit card, ask yourself how you plan to use it. Will it serve your financial goals or do you just want one with no clear reason? Signing up for a credit card with no clear plans may lead to impromptu spending just because you can. Meanwhile, if you know how exactly you want to use your credit card—perhaps to spread out payment for a large purchase or to build up rewards—then you’re more likely to use it responsibly. Simply put, hold off from getting a credit card until you’ve figured out your personal financial goals and how a credit card ties into it.
Having a credit card is a financial responsibility and thus requires discipline. Before applying for a credit card, be sure to evaluate the points listed in this article. Even if a credit card isn’t fit for you at this time, this self-evaluation can at least guide you into improving your current financial situation.
