Owning your first credit card is a new kind of independence — financial independence, a real symbol of adulthood. Contrary to the widely-owned debit card, a credit card lets you borrow funds from the card issuer in advance and repay at a later date.
Before you get carried away with spending, here’s a caveat to think about — late payments on your credit card bills come with extra charges. Hence, it’s wise to understand your financial health and lifestyle habits before applying for a credit card.
A credit card has its benefits like cashback, reward points or travel miles as we have covered in ‘Debit Card vs. Credit Card: What’s the Difference? With the emergence of the cashless trend, using a credit card instead of carrying a large stash of cash also makes it convenient and safe. Want to know what to look out for in your first credit card and learn how to apply for one? Read on.
What to Look for in Your First Credit Card
Before applying for a credit card, you should always read through the cardholder agreement. This can be found usually on the bank’s website. Alternatively, you can call or visit the bank to get more information on the cardholder agreement. Here are a few things to look out for:
1. Annual Fees
Some credit cards charge an annual fee. While this is typically waived in the first year, it is better to avoid cards with them — unless you do not qualify for a no-waiver-fee credit card. In Cambodia, the annual fees could start from US$ 15 a year. However, if your credit card offers a reward program, you could potentially earn enough cashback or rewards points that could cover the annual fee. Hence, always check with the card issuer on what the options are.
2. Interest Rate
Annual Percentage Rate (APR) is the yearly percentage of interest charged on a credit card. If you spent a certain amount on your credit card and did not pay within the the given period, this rate will be charged on top of the balance owed. If you continue to delay payment, your debt will accumulate until it is settled.
3. Grace Period
The grace period is one of the most important factors to be considered. It indicates the amount of days you have left to avoid interest charges after the end of a billing cycle. You will only need to pay the full cost of your total payment if you pay your bill within this period. If you cross the grace period, then the interest rate will be applied to the total balance amount.
4. Incentives
A credit card that comes with incentives can be beneficial. These incentives include cashback, reward points, and air miles. You can earn a point for every dollar you spend using your credit card, which can be redeemed in terms of cashback, coupons, gifts or free miles depending on the credit card.
How to Apply for your First Credit Card?
Applying for your first credit card is an exciting one. Before applying for one, do consider the below:
1. Are you ready for your first credit card?
While you get to enjoy perks like cashbacks and reward points, it’s crucial to first understand where you’re at financially. Are you able to pay your bills on time? Are you able to repay the interest rates if you miss a payment? All these factors may affect your credit score or also known as Khmer score if you’re not aware.
2. Apply for a card within your range
Before applying for a credit card, do check that you have met the minimum requirements, for example age limit, working experience, income, and living period. Certain cards that have a higher credit limits and higher points may have higher requirements. Assess your financial needs and pick a card that suits your lifestyle.
3. Know how to apply for your credit card
To apply for a credit card in Cambodia, you may follow the 4 easy steps below:
- Visit a bank branch or designated centre of the card issuer.
- Fill in an application form with the required documents attached. Required documents:
- ID or Passport
- Income proof
- Current residential documents
- Location Map (hand-drawing)
- Your application will be assessed by the card issuer.
- Wait for your application approval and you’ll receive your credit card once approved.
How to Build a Good Credit Score with Your First Credit Card
Credit Bureau Cambodia introduced Khmer score, a credit scoring system in 2015 which is being documented in your personal credit report.
Timely credit card bill payments translate to a healthy credit score. Having a good credit score leads to a secure credit history, which in turn helps to lower interest rates on credit cards and loan, increases chance of a loan approval and getting approved for higher limits. While ‘credit score’ is not popular in Cambodia, it is good practice to monitor your credit card purchases and maintain a good credit payment history. If you struggle to remember to pay your bill on time, check to see if your bank offers an automatic payment setup to help with paying on time.
Owning a credit card has its advantages but it should be used responsibly, especially when it’s your first credit card. By paying your bills on time and maintaining a healthy credit history, banks are more likely to upgrade your credit limit card when needed and you will also be able to enjoy other benefits in the long run like lower interest rates, longer grace periods, and waived annual fees.
