For young professionals aspiring to start their first job, the idea of applying for a new credit card can be both lucrative and exciting. Still, due caution must be taken before taking such a step. Concerns related to credit misuse, excessive spending, and crossing credit limits are pressing issues that must be addressed before applying for any new credit card.
Experts suggest that if an aspiring credit card applicant is looking to secure their first credit card, it becomes crucial for them to understand the pros and cons of managing a credit card. A credit card, early on in a career, can actually set the foundation for long-term financial prosperity and growth. The credit card holder can slowly but surely build a positive credit history and a strong credit score by making timely repayments of credit card bills.
Why getting a credit card early can make sense
A credit card is more than just a financial tool. It offers someone entering the workforce several other crucial advantages. Some of them are discussed briefly below:
- Building a credit history: Once the credit card is availed, making on-time payments of pending credit card bills, home loan EMIs, and personal loan EMIs can help the borrower establish a positive credit profile. A credit profile that showcases responsible credit management. Such behaviour ensures that future personal loans, credit cards, and home loans become easier to secure.
- Emergency financial support: A credit card can also be a valuable resource for providing immediate financial assistance, especially in cases where the holder is faced with unforeseen circumstances, such as medical expenses, surgery costs, or other similar expenses.
- Financial discipline: Utilising a credit card wisely and with a long-term vision boosts budgeting and responsible money management. This is a financial tool that can also help holders
Deep Agrawal, Head of Payments at PhonePe, says, “For a young professional entering into the formal workforce, a credit card can be the first and most accessible step into the world of formal credit. Using it responsibly for planned expenses and paying dues on time is a powerful way to build a strong credit history from the beginning. This financial discipline is foundational when it comes to securing loans for key life goals, like a car or a home, on better terms in the future.”
Things to consider before applying for your first credit card
Before going ahead with your first credit card application, you should consider:
- Limiting applications: Ensure that you start with only one credit card and do not exceed this. Increasing the total number of credit cards can complicate due dates and repayment plans, and result in creating unnecessary debt.
- Make payments on time: To avoid interest charges by clearing dues within the stipulated billing cycle. This is essential to showcase responsible debt management behaviour.
- Opt for benefits tailored to your lifestyle needs: Choose benefits that align with your lifestyle, such as fuel, dining, or digital expenses. You should choose these benefits after carefully understanding your day-to-day spending patterns.
Applying for a new credit card at the beginning of your career can be a smart move. Still, before going ahead, an applicant should analyse the pros and cons of such a credit instrument.
It is essential to factor in that credit cards come with several inherent risks, such as high interest rates, debt trap risks, hidden fees, negative implications for credit scores, the possibility of fraud, and misrepresentation. That is why one should proceed with credit cards after conducting proper due diligence and understanding the associated risks.
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Disclaimer: Mint has a partnership with fintech companies to offer credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article aims to educate readers and raise awareness about the essential needs for credit, including loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with risks such as high interest rates and hidden charges. We advise investors to discuss with certified experts before taking any credit.
