10 Tips on Handling Your First Credit Card
Getting your first credit card is sort of like adopting a dog from a shelter. Once you get it home, the dog could either be an awesome companion or it could pee on your carpet and chew a hole through your couch.
Signing up for your first card can be a beautiful beginning to a successful financial future or it could end in complete disaster. Here are ten tips to make sure your first credit card doesn’t end in catastrophe.
- Ask yourself why. Why do you want this card? If it’s because you would like to start getting the ball rolling on your credit history you’re in the right place. If you’re doing it because you want to push back paying for items you want now, but can’t afford…stop. This is already going in a bad direction.
- Shop around. Being your first card, your options are probably limited. That doesn’t mean you only have one option though. Figure out if you are getting a student card, a secured card, etc.
- Understand what you’re signing up for. Once you have started the application process, make sure you understand everything about this card. What’s the interest rate? The limit? Annual fee?
- Designate a purpose. Limiting what you will put on the card can help keep you from overusing it. If you can force yourself to only use the card for gas or groceries you should be able to keep your spending under control since these are things you would buy anyways. Designating your card for clothes or electronics won’t keep you as restrained.
- Beware of 0%. If you have a 0% introductory rate, this doesn’t mean you can just start racking up the bill penalty free. Eventually that period will end and if you haven’t paid off the whole balance, you could get hit with a lot of interest.
- Pay it off. At least in the beginning, make sure you can pay off your bill every month. This is the best way to establish good credit and the easiest way to keep yourself out of trouble.
- Pay on time. There is nothing worse you can do to your credit than paying your bill late. Interest tends to go up, fees are tacked on and your credit score starts to plummet.
- Mind your limit. Maxing out a credit card or worse yet, going over your limit points you in the opposite direction of financial stability. These two moves are what put people in debt very quickly.
- Raise your limit. This is only a good idea if you have managed to keep a level head about your credit. If you are budgeting yourself, paying your card off in full and paying your bills on time for six months to a year, it’s okay to ask for your limit to be raised. Having low balances and high limits are beneficial for your credit score.
- Avoid opening new lines. Give yourself some time to perfect the use of one card before signing up for more. By getting more cards you are not only adding more responsibility and more bills to keep track of, this action also reflects poorly on your credit report.
Learning the finer details about credit is great, but the best thing you can do for yourself is use common sense. A credit card is not free money or a way to postpone paying for things. Your first credit card is a way to start preparing yourself for future financial responsibilities, like car loans and mortgages.
Approach your new credit card with caution the way you would that new dog from the pound. There may be an adjustment period, but as long as you don’t rush and have patience you should be able to avoid getting bitten.