Credit cards are a common tool used to make purchases and manage finances. However, for individuals with poor or limited credit histories, obtaining a credit card can be difficult. That's where First Savings credit cards come in. These cards are designed to help individuals build credit by providing them with access to credit even with a low credit score. While a First Savings credit card can be a great tool to build credit, it also comes with risks that individuals should be aware of before applying. In this article, we'll explore the benefits and risks of using a First Savings credit card, provide tips on how to use it wisely, and offer alternatives to consider.
What is a First Savings Credit Card?
A First Savings credit card is a type of credit card that is designed for individuals with poor or limited credit histories. The card is issued by First Savings Bank, which is a financial institution that specializes in providing credit cards to individuals with low credit scores. These credit cards can be used for purchases at any merchant that accepts credit cards.
First Savings credit cards may have lower credit limits and higher interest rates than other types of credit cards. However, they can be a helpful tool for individuals who are trying to build their credit history. By using the card responsibly and making timely payments, individuals can improve their credit scores over time. Additionally, some First Savings credit cards may offer rewards such as cashback or points for purchases, which can be redeemed for various benefits.
First Savings credit cards may have lower credit limits and higher interest rates than other types of credit cards. However, they can be a helpful tool for individuals who are trying to build their credit history. By using the card responsibly and making timely payments, individuals can improve their credit scores over time. Additionally, some First Savings credit cards may offer rewards such as cashback or points for purchases, which can be redeemed for various benefits.
Benefits of Using a First Savings Credit Card
Using a First Savings credit card can have several benefits, including:
- Building Credit: One of the main benefits of using a First Savings credit card is the opportunity to build credit. By using the card responsibly and making timely payments, individuals can demonstrate to credit bureaus that they are capable of managing credit responsibly. Over time, this can lead to an improvement in their credit score.
- Access to Credit: For individuals with limited or poor credit histories, obtaining credit can be difficult. First Savings credit cards offer access to credit that may not be available through other lenders, allowing individuals to make purchases and build credit at the same time.
- Rewards Programs: Some First Savings credit cards offer rewards programs that allow individuals to earn cashback, points, or other benefits for purchases made with the card. This can be a great way to save money or earn rewards while building credit.
- Online Account Management: First Savings credit cards typically offer online account management tools that make it easy to track spending, make payments, and manage the account. This can be especially helpful for individuals who are working to build good credit habits.
- Security Features: First Savings credit cards may come with security features such as fraud alerts and zero-liability protection, which can help protect individuals from fraudulent activity.
Risks of Using a First Savings Credit Card
While using a First Savings credit card can have its benefits, it also comes with certain risks. These risks include:
- High Interest Rates: First Savings credit cards may have higher interest rates than other types of credit cards. This can result in higher fees and interest charges for individuals who carry a balance on their card.
- Fees: First Savings credit cards may also come with various fees, such as annual fees, late payment fees, and over-limit fees. These fees can add up quickly and result in high costs for the cardholder.
- Credit Damage: Failing to make timely payments on a First Savings credit card can result in damage to an individual's credit score. This can make it more difficult to obtain credit in the future and can result in higher interest rates on other loans and credit cards.
- Debt: Using a credit card can lead to debt if the cardholder spends more than they can afford to pay back. This can result in high interest charges and fees, and can make it difficult to pay off the balance.
- Fraud and Security Risks: Using a credit card comes with the risk of fraud and security breaches. While First Savings credit cards may come with security features to protect against these risks, individuals should still be cautious and monitor their accounts for any suspicious activity.
How to Apply for a First Savings Credit Card?
If you are interested in applying for a First Savings credit card, here are the steps you can follow:
- Check Your Credit Score: Before applying for a credit card, it's important to check your credit score. First Savings credit cards are designed for individuals with poor or limited credit histories, but it's still a good idea to know where you stand.
- Research Card Options: First Savings Bank offers several different credit card options. Research the different cards to find one that best fits your needs and spending habits.
- Gather Required Information: To apply for a First Savings credit card, you will need to provide personal information such as your name, address, and Social Security number. You may also be asked for employment and income information.
- Apply Online or by Phone: First Savings Bank offers online and phone applications for their credit cards. Visit their website or call the number provided to start the application process.
- Wait for a Response: After submitting your application, you will need to wait for a response from First Savings Bank. This may take a few days to a few weeks.
- Activate Your Card: Once approved, you will receive your credit card in the mail. Follow the instructions provided to activate the card before using it.
- Use the Card Responsibly: Remember to use the card responsibly by making timely payments and avoiding overspending. This will help you build credit and avoid debt.
Alternatives to First Savings Credit Card
While a First Savings credit card can be a good option for individuals with poor or limited credit histories, there are also alternatives to consider. Here are a few:
- Secured Credit Cards: Secured credit cards require a security deposit to be made upfront. This deposit is used as collateral and can help individuals with poor credit scores get approved for a credit card. Some secured cards may also offer rewards and benefits.
- Credit-Builder Loans: Credit-builder loans are loans that are designed to help individuals build or improve their credit scores. These loans work by lending a small amount of money that is paid back in installments. As the borrower makes timely payments, their credit score can improve.
- Authorized User: Becoming an authorized user on someone else's credit card can also help individuals build their credit scores. This option allows individuals to use someone else's credit card while also building credit as the primary cardholder makes timely payments.
- Retail Credit Cards: Many retailers offer their own credit cards, which can be used to make purchases in their stores. These cards often come with rewards and discounts, and may also be easier to obtain than traditional credit cards.
- Credit Unions: Credit unions are not-for-profit financial institutions that offer a range of financial products, including credit cards. Credit unions may offer lower interest rates and fees than traditional banks and may be more willing to work with individuals who have poor credit histories.
Common First Savings Credit Card Fees
Like all credit cards, First Savings credit cards come with a range of fees that cardholders should be aware of. Here are some of the most common fees associated with First Savings credit cards:
- Annual Fee: First Savings credit cards may come with an annual fee that is charged each year. This fee can range from $0 to several hundred dollars, depending on the card.
- Late Payment Fee: If you don't make your minimum payment by the due date, you may be charged a late payment fee. This fee can be up to $39 per occurrence.
- Overlimit Fee: If you exceed your credit limit, you may be charged an overlimit fee. This fee can also be up to $39 per occurrence.
- Cash Advance Fee: If you use your credit card to get a cash advance, you may be charged a cash advance fee. This fee can be a percentage of the amount of the cash advance, with a minimum fee of $10.
- Foreign Transaction Fee: If you use your credit card to make purchases outside of the United States, you may be charged a foreign transaction fee. This fee can be up to 3% of the purchase amount.
- Balance Transfer Fee: If you transfer a balance from another credit card to your First Savings credit card, you may be charged a balance transfer fee. This fee can be a percentage of the balance transferred, with a minimum fee of $5.
- Returned Payment Fee: If a payment you make is returned, you may be charged a returned payment fee. This fee can be up to $39 per occurrence.
How to Improve Credit Score with a First Savings Credit Card?
A First Savings credit card can be a great tool for building or improving your credit score. Here are some tips to help you use your card responsibly and boost your credit score:
- Pay on Time: Making your credit card payments on time is one of the most important factors in building a good credit score. Set up automatic payments or reminders to ensure that you never miss a payment.
- Keep Your Balance Low: Keeping your balance low can help improve your credit utilization ratio, which is an important factor in calculating your credit score. Ideally, you should aim to use no more than 30% of your available credit.
- Monitor Your Credit Report: Regularly monitoring your credit report can help you identify and correct any errors that may be negatively affecting your credit score. You are entitled to a free copy of your credit report each year from each of the three major credit bureaus.
- Avoid Closing Your Account: Closing a credit card account can negatively impact your credit score, as it can decrease your available credit and shorten your credit history. Instead, consider keeping your account open and using it responsibly.
- Upgrade to an Unsecured Card: As your credit score improves, you may become eligible for an unsecured credit card. These cards typically offer higher credit limits and better rewards and benefits than secured cards.
First Savings Credit Card vs. Other Credit Cards
First Savings credit cards are just one option in a crowded market of credit cards. Here are some key differences between First Savings credit cards and other types of credit cards:
- Secured vs. Unsecured: First Savings credit cards are secured credit cards, meaning that you must provide a security deposit to open the account. Unsecured credit cards do not require a security deposit, but typically require a higher credit score to qualify.
- Credit Limits: First Savings credit cards typically have lower credit limits than unsecured credit cards, as they are designed for those with poor or limited credit history. Unsecured credit cards may offer higher credit limits, depending on your creditworthiness.
- Fees: As mentioned earlier, First Savings credit cards may come with an annual fee and other fees such as a late payment fee, overlimit fee, and balance transfer fee. Unsecured credit cards may also come with fees, but the fees may vary depending on the card.
- Rewards: First Savings credit cards typically do not offer rewards programs, while many unsecured credit cards offer rewards such as cash back, points, or miles for purchases.
- Qualifying Requirements: First Savings credit cards may be easier to qualify for than unsecured credit cards, as they are designed for those with poor or limited credit history. Unsecured credit cards typically require a higher credit score and may have more stringent qualifying requirements.
Conclusion
First Savings credit cards can be a valuable tool for those looking to build or improve their credit score. By using your card responsibly and making your payments on time, you can demonstrate to lenders that you are a responsible borrower and potentially open up opportunities for better credit products in the future.
However, it is important to be aware of the risks associated with using a secured credit card like a First Savings credit card, including high fees and the risk of losing your security deposit if you are unable to make your payments. It is important to carefully consider your financial situation and goals before applying for any credit card, and to compare different options to find the one that best fits your needs.
Whether you decide to go with a First Savings credit card or another type of credit card, remember that responsible credit card use is key to building and maintaining a good credit score. By using your card wisely and making your payments on time, you can set yourself up for a brighter financial future.
However, it is important to be aware of the risks associated with using a secured credit card like a First Savings credit card, including high fees and the risk of losing your security deposit if you are unable to make your payments. It is important to carefully consider your financial situation and goals before applying for any credit card, and to compare different options to find the one that best fits your needs.
Whether you decide to go with a First Savings credit card or another type of credit card, remember that responsible credit card use is key to building and maintaining a good credit score. By using your card wisely and making your payments on time, you can set yourself up for a brighter financial future.