Despite their bad rap, credit cards can prove useful. They help you build your credit, which will prove handy in future when you wish to apply for a mortgage, a car loan or a homeowners insurance. While most credit card issuers prefer to deal with customers with credit history, don’t let this discourage you. If used responsibly, your first credit card will unlock access to further credit in future.
Factors To Help You Choose Your First Credit Card
When choosing your first credit card, check the annual fee. Some credit cards have no such fees, while other charge over $100. If you are unsure what the annual fee is for, call a customer service representative to obtain a clarification so as to avoid paying for what you don’t understand.
Secondly, look for a card with a lower interest rate that you can afford. Some credit card issuers provide introductory offers such as zero interest rates, though the interest will soon skyrocket after the period elapses, making it a bad deal.
You should also shop for a card with attractive perks such as earning hotel or airline points, or cash back on every dollar spent in selected retail stores.
Dos of Using Your First Credit Card
Once you choose the right card that suits your needs, draft a strategy on how you will manage it. The following tips will help you stay out of debt and help build your credit.
➢ Claim Your Rewards:-Since it is an uncommon feature for most people to settle their credit card bills on a timely basis, rewards do exist for people who pay their bills in full and on time.
➢ Tread Slowly:-Avoid going on a spending spree once you obtain your credit card. It is very easy to spend money more than you had planned if you don’t see any outflows out of your credit card account.
➢ Pay Your Credit Card Bills on Time:-Banks can be ruthless. It therefore pays to do all you can to make those timely credit card bill payments when they fall due.
➢ Always Check Your Charges Each Week:-Always scrutinize your charges every other week so that you can spot any errors or any irresponsible spending habits.
➢ Check if There are any Hidden Charges:- Apart from an annual fee, other charges include application fee, late payment penalty, cash advance fee, a over-limit charge and other miscellaneous charges. Failure to check such charges will cause you to be ripped off.
➢ Know the Interest Rates:- Certain credit card issuers start to charge interest immediately you purchase the card, while others do so from the billing date. Keep an eye for when interest payments are due to avoid penalties and bad credit score.
➢ Read the Fine Print:-Since most credit companies make money from interest payment defaulters, read the fine print to know what you are up to.
Donts of Using Your First Credit Card
Credit cards can ruin you financially if you fail to religiously stick to the following rules:
➢ Avoid Using a Card Whose Charges You are Unsure of:- You should always keep track of your spending and how much money you are being charged for using the credit card. For example, how much are you charged for shopping online? This gives you total control of your finances.
➢ Avoid Having too Many Credit Cards:-If you are having your first credit card, avoid signing up for another one. This helps you avoid incurring too many charges and helps you cultivate discipline in your financial affairs.
➢ Don’t Exceed Your Budget:-If an item costs more than you had budgeted it, avoid buying it.
➢ Avoid purchasing credit card extras:-Majority of credit card issuers also provide other services such as life insurance and credit card fraud protection, though such services are mostly unnecessary and are generally overpriced.