Tips for first-time credit card users
Getting your first credit card? Now's the perfect time to educate yourself in the best ways to use your card.
Know the difference between being able to buy what you want and being able to afford it. Arm yourself with this basic information before you dive in.
- The credit-card issuing company is lending you money, and you're responsible for repaying that debt.
- Take the time to choose a card that fits the way you plan to use it.
- If you need to establish your credit, consider getting a secured card—if used wisely, it can help you apply for an unsecured credit card.
- Investigate the details of the card thoroughly. Be sure to understand all the fees and how interest charges are calculated.
Getting your first credit card can be exciting. Here are some good habits to establish to make sure it stays fun:
- Put together a spending and budget plan – Your credit card payments should be less than 20% of your monthly income.
- Be sure to use your credit card wisely – Consider spending no more than 30% of your available credit limit.
- Start slowly – Keep using cash, debit cards and checks for most purchases, especially until you get comfortable with the card and your monthly payments.
- Keep an eye on your balance – You should monitor your credit card balance regularly. For example, set up your online banking to include your credit card balance for easy reference. You can also set up alerts to send your balance to you on a regular basis, or when it reaches a certain threshold.
- Pay your balance on time each month – Set up alerts to remind you of payment dates. Avoiding late payments will help you build a good credit score.
- Pay off your entire balance each month – If you can't pay the entire balance in full, be sure to pay more than the minimum balance to help save money in interest charges.
- Keep your card active – Letting a credit card become inactive could negatively affect your credit score and, if your lender closes the card, your total amount of available credit will be reduced. Make small credit purchases every 3 or 4 months just to keep the card active.
- Monitor your credit report – Be sure to check your credit score on a regular basis. You're entitled to a free credit report every year. Visit www.annualcreditreport.com (opens in a new tab) to get your copy now.
Everyone makes mistakes, but the following tips can help protect you.
- Resist the temptation to apply for multiple credit cards at once – Too many applications and inquiries can negatively impact your credit score.
- Never let other people use your card, and don't give out the number – Remember: You're ultimately responsible for all charges on your card.
- Don't skim past your transaction history – Check your recent transactions every few days, either online or from your card's mobile app to help guard against suspicious activity and manage your account responsibly.
- Avoid using your card for cash advances – The interest rate charged for cash advances is usually higher that the purchase rate, and interest is charged immediately.
The bottom line
Learning to use a credit card takes time and practice. Follow these first-time credit card tips to help you start building your reputation as a responsible credit card user.
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