Credit Card 101 for Students With No Credit History
Ten things to consider to secure your first credit card.
How to Choose your First Credit Card
A credit card may seem like just another tool to help you make purchases, but it can be much more. When used responsibly, a credit card can help you build a good credit history, allowing you to get loans at favorable interest rates and more. Credit cards can also help you earn rewards on your everyday purchases and protect those purchases in case of theft or damage.
Simply put, a credit card can be a lot more useful than your debit card if you use it the right way. Ready for your first card?
What is a credit card?
A credit card looks just like a debit card. However, instead of having the funds removed directly from your checking account when you make a purchase, you’ll essentially take on a short-term loan. This loan may or may not accrue interest, depending on when you pay it off.
Why you should get a credit card?
A credit card used wisely will help you build your credit. Good credit can help you obtain future loans at favorable rates. It can also help you get approved for an apartment or cell phone, avoid utility deposits and get lower insurance premiums.
How to I get the best Credit Card rate with no credit?
An MTC Federal Platinum Mastercard®, has a promotional introductory rate of 6.90% - 14.90% APR*.
Federal law restricts credit unions, like MTC Federal, from charging more than an 18% interest rate on their loans — and that applies to credit cards, too.
- MTC Federal Members benefit from NO ANNUAL FEES and NO BALANCE TRANSFER FEES.
- Earn loyalty reward points for every $1 spent with your MTC Federal Platinum Mastercard®.
The difference between secured and unsecured credit cards.
At MTC Federal, secured credit cards are backed by a cash deposit equal to the card’s credit limit. This acts as collateral (security) and reduces the risk of nonpayment for the card issuer. Secured credit cards are great options for those who haven’t built a solid credit history yet.
You’ll make payments the same way as you would with an unsecured card, and you’ll pay interest if you don’t pay off your balance in full. Once you transition to an unsecured card or cancel your secured card, you’ll receive your deposit back, provided you’ve paid off the balance.
Unsecured credit cards aren’t backed by a cash deposit or any other collateral. You’ll get a credit limit based on your income level and credit history
How credit card interest is calculated?
MTC Federal will not charge you any interest on purchases if you pay your entire balance by the due date each month. However, if you don’t pay your balance in full, you’ll accrue interest on your average daily balance during the month.
For cash advances and balance transfers, interest begins accruing on the transaction date.
How minimum payments are determined?
A minimum payment is the smallest amount of money you can pay each month without damaging your payment history and incurring a late payment fee. At MTC Federal your minimum payment will always be 2.5% of your balance or $25, whichever is greater. Any over limit and/or delinquency amounts are also added to the minimum payment due.
We always recommend that you pay your balance in full by the due date. If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance.
How credit cards affect your credit score?
Below are the 5 factors that affect your FICO credit score and how having a credit card correlates with your score.
- Payment history is the most important FICO score factor. By making your payments on time, 100% of the time, you can increase your credit score. A late credit card payment can be reported to the bureaus and hurt your score.
- Credit utilization, or the percentage of your credit limit that you’re using at any given time, is the second most important FICO score factor. It’s important to try to keep your debt balance below 30% of your credit limit.
- Length of credit history is the age of your accounts, as well as the average length of all of your credit accounts, make up your length of credit history. The longer, the better. You can influence this factor with a credit card by keeping old accounts open and active.
- Credit mix refers to the mix of different types of credit accounts you have, such as student or auto loans, or a mortgage. Diversity is preferable to only one type of account, but this factor has a small influence on your FICO, so you shouldn’t go out of your way to take on interest-accruing debt.
- New Credit; when you apply for a new credit card, your score may take a small hit. To combat this, avoid applying for several cards in a short period of time, especially if you haven’t been building your credit for very long.
How do I earn rewards?
For every dollar spent on your MTC Federal Platinum Mastercard®, members automatically earn 1 loyalty reward point. Members can redeem points for hundreds of rewards that fit their lifestyle.
What is an EMV chip, why it matters.
An EMV chip is a small microchip embedded in your credit card that helps prevent fraud by generating a one-time code (token) every time the card is used. This can prevent stolen transaction data from being used to make fraudulent purchases.
What is Digital Wallet?
A digital wallet is a system that securely stores user’s payment information and passwords for numerous payment methods and websites.
See how MTC Federal MasterCards® are available for
How to Apply for your First Credit Card?
Establishing credit for the first time is easy when you do it the RIGHT WAY! Schedule a 30 minute Individual Financial Analysis with one of our MTC Federal financial experts to help you establish the credit you deserve and meet your financial goals.