How To Manage Your First Credit Card
Congratulations! You’ve decided to take the next big step toward building credit. In order to make sure you continue to do so in a positive and responsible manner, we’ll walk through the many do’s, don’ts, tips and tricks of how to successfully manage your first card and leverage the benefits that come with it.
Determine your own personal rules for your credit card
Will you use this card simply for emergencies? Travel expenses? Car repairs? Grocery shopping trips? Gas fuel-ups? Determine your own personal limits before beginning regular usage. Winging it is an option – but this isn’t something you want to begin doing without any rules or personal boundaries. While familiarizing yourself with how everything works, start out by supplementing small purchases such as gas or groceries. You want to have small purchases that you can easily pay off before the end of each payment cycle.
Depending on the type of credit card, many offer interest-free promotions for at least 12 months. While this may seem tempting to spend as much as possible and pay it off at a later time, you don’t want to create this habit. For example, to build a positive credit history – determine what recurring expenses are manageable for you to pay timely. Let’s say you spend under $100 each month. Be sure to make a payment on or before the due date in full to establish solid financial habits.
Use your credit limit healthily
Many people understand the notion that it’s not ideal to have no credit available and it’s not great to utilize a large amount of credit. It’s imperative you set some ground rules and abide by them as much as possible. The ratio of your overall credit limit versus the credit balance can be defined as credit utilization. Let’s use a real-life example. Your total credit amount is $10,000 and you have used half – this is $5,000. Based on this current scenario, your credit utilization is 50%. Ideally, you want to keep that number under the 30% threshold. I know what you’re thinking – why if this is the credit limit I was given? Using a fraction of what’s available to you provides the credit card lenders with the confidence that you have the ability to make timely payments each month and can exercise discipline.
As your credit utilization increases over time, your credit score has the potential to be negatively impacted if you use the total amount you’re awarded. To prevent this from happening, it’s important to ask yourself, is this helping or hindering your financial journey? Pay very close attention to your posture when it comes to spending as well. Do you consider yourself an impulsive spender? Do you tend to make money decisions when experiencing any type of emotional duress? Lenders of any kind want to have the confidence that you have the discipline and willpower to financially handle any and all credit obligations, no matter your personal circumstances.
Redeem your rewards
Depending on the type of credit card you have, you may have points that accumulate and be redeemed over time. Travel rewards, discounts, or credits toward your balance are just a few options that may be offered to you. Visit your lender’s website to investigate and stay current with all of the benefits available to you. Don’t forget to download the Mint app and connect your new card to have balance and card information quickly at your fingertips.
Communicate with your credit card provider
In the instance you experience any type of financial hardships in the future, please make it a priority to communicate this as soon as any issues arise. Many times, explaining any personal mishaps while proposing reasonable solutions may work in your favor. Remember, avoidance is not acceptance. Make it a priority to familiarize yourself with your credit cards’ terms and conditions out of sheer preparation. When discussing the topic of finances, many of us aren’t too keen on disclosing personal information (especially to those we haven’t established any rapport with) – however, if this can result in not impacting your credit score; it’s better to be upfront and honest! Being proactive not only provides leverage, but it can also guarantee more favorable solutions in the end.
Familiarize yourself with any underlying fees
When you receive your first credit card, it will include paperwork that will lay out most if not all of the terms and conditions. While you don’t have to read the very fine print all in one day or one sitting, it’s important to review this material shortly after having the card in hand. Break down section by section so you can know exactly what’s available to you – and note things that can potentially harm your credit. Review the company’s website as well for the most up-to-date information. In the instance you have any questions, don’t hesitate to contact customer service. They are available to address any concerns and should be able to rectify any issues you have quickly. Be sure to double-check if the credit card has any annual fees and familiarize yourself with the interest rate terms after the interest-free period expires.
Avoid cash advance options
It can seem like a sweet deal to utilize the cash advance option if you find yourself in a crunch. However, there are so many fees and complicated specifics that can leave you with feelings of regret, frustration, and confusion. It’s best to find another alternative – every option provided by a lender is just that, an option. You don’t have to redeem it. Remaining fiscally responsible is managing your money healthily, but also knowing when offers are of no benefit to you or your financial wellbeing.
Review your purchases regularly
With so many ways to view your account details, take the time to review your credit card statements and/or your charges online. Not only are you verifying each purchase is valid, but it also helps you see exactly where and how you are managing your card. If something doesn’t appear accurate, contact your lender immediately to resolve it as soon as possible.