In a world where plastic rules everything and credit is king, getting your first credit card is a big deal. When properly managed, a credit card can be the first step towards building a strong financial future. How you use it, can ultimately determine your ability to do everything from landing that job you’ve always wanted to buying a house and a car. By educating yourself before making your first purchase, you can avoid common pitfalls and use this new card to your advantage. Below are some suggestions
- Be Mindful of Your Spending – As exciting as it may be to have your very first credit card, it is imperative that you don’t go overboard. One of the factors used to determine your credit score is your credit utilization ratio. This is the card available limit compared to how much of it you’ve used. You want to try and keep this around 30%. So, if you have a credit card with a limit of $1,000, you want to try and keep the balance at or below $300. Once you start to go over that percentage, you’ll notice a drop in your credit score.
- Never Charge More Than You Can Afford – All too often people max out their credit cards or charge astounding amounts to the card. Though you have time to pay it back, the longer it takes you to repay the balance, the more it ends up costing you in interest. As a good measure, it is recommended that you never charge any more on your card than you can afford to repay within 1-3 months.
- Always Pay on Time – It is not only important that you keep your credit card balances low, but that you make your payments on time. When you applied for your card you were likely provided with a date in which payments would be due each month. Whether it is the 1st, 15th, or 30th, of the month, you want to make sure that you have the funds available to make the required payment. If there is ever a time that you come up short or need more time to pay it, if you may need a payroll advance, it may be ideal to take out a short-term loan to pay the balance instead. A loan for $100 would cover the cost of your credit card payment, keep your credit history intact, prevent you from getting hit with late fees, and allow you a bit more time to come up with the funds from your regular income.
- If There’s a Problem, Speak Up – Everyone falls short sometimes, and you don’t have to feel bad about it. However, where most credit card users mess up is ignoring their past due bill or calls from the credit card company. This only forces creditors to take further action on your account which may include higher interest, late fees, and other penalty charges. If you’ve fallen on hard times or simply need more time to pay the balance it is best to pick up the phone and call. Explain your circumstances and find out if there’s anything they can do to help. If you’ve been otherwise diligent in paying your bill on time, they may be willing to work with you. This might include lowering interest rates, changing the due date, or deleting a late fee or penalty to make the balance more affordable.
Having your first credit card is really exciting. You now have a little “nest egg” or “cushion” to help you purchase things you wouldn’t otherwise be able to afford right away. With this modern convenience comes serious responsibilities that you should not take lightly. By keeping the above-mentioned financial tips in mind and managing your card efficiently, you’ll open the doors for more opportunities to borrow in the future.