Dos & Don’ts Of Your First Credit Card
Handling your first credit card is a lot like learning to drive for the first time. You won’t be perfect at it the moment you start, but the more knowledge and experience you have, the better you will be. Things can get out of hand fast so take the time to learn more about credit card usage before you jump in. Before you apply let’s take a look at some dos and don’ts for your first credit card.
Dos
Research Thoroughly
Credit cards are not a one size fits all type of deal. While one credit card might be good for some people, it may not work for you or your lifestyle. Primary example: travel credit cards. These cards are great for frequent travelers. But for someone who doesn’t travel as much, this card wouldn’t make sense for them. Make sure to do your research on what credit card would best suit you and check out your local bank for what type of credit cards they offer. Some features to look for in your credit card include:
- Rewards
- Monthly credit reports
- Low interest rates
Keep Your Spending In Check
It is best to use your credit card just as you would use your debit card. Only spend money you actually have. One of the worst mistakes beginner credit card users make is spending more money that they can’t pay back. This will quickly ruin your credit score and might even put you into debt. Carrying a credit card balance over from month to month will increase your interest, therefore costing you more money.
Tip: A good rule of thumb for building a strong credit score is to spend no more than 30% of your credit limit.
Check Your Statement Regularly
When owning a credit card, you will receive a statement every month that goes over your transactions from the previous billing cycle. It is important to go over your statement thoroughly check for any errors or unexpected charges. If you do happen to come across any errors, you should report them to your credit card issuer immediately.
Don’ts
Miss A Payment / Pay Late
Paying on time is the single most important thing you can do when using a credit card. It is essential to be aware of upcoming deadlines. In many circumstances, missing one credit card payment can lead you down a bad path of consistent missed payments. Here are some common consequences you may face if you don’t pay your credit card on time:
- Increased interest
- Late fees
- Damaged credit score
Don’t worry! There are several things set in place to help you make sure you pay your credit card on time. One option is to set up automatic payments. Autopay will pay your monthly balance every month from a linked bank account. This comes with many perks like eliminating late fees, reducing interest, and improving credit score. Another way to avoid late payments is to write down deadlines in a planner or calendar. This is just one of the many ways to avoid paying late, so take advantage!
Only Make Minimum Payments
The phrase “minimum payments” may be tempting. However, only paying the minimum monthly balance on your credit card will cost you more money than it will save you in the long run. By paying a little extra towards your credit card balances each month, you can:
- Reduce interest
- Pay off your debt faster
- Improve your credit score
- Access better loan terms
Tip: The best thing to do is avoid carrying a balance.
Open More Than One Card
The most enticing, and yet also most challenging thing with credit cards is the phrase “buy now, pay later”. Companies may try to get people like you to open retail credit cards. While this may seem like a good choice in the moment to take advantage of a deal, overall, this credit card isn’t needed. Be careful to not open too many credit cards with several different places because it can be easy to lose track. If you choose to open multiple credit cards because it will benefit you, just make sure you stay organized and keep track of your payments.
Owning your first credit card doesn’t have to be scary. With the right knowledge and self-discipline, you can begin your purchasing journey right away!