If this is your first credit card, you’re undoubtedly quite excited—but perhaps a bit frightened. Credit cards enable you to conduct a wide range of transactions, particularly online purchasing. They do, however, come with certain risks: overspending, debt, and credit score ruin, are all conceivable with a poorly handled credit card.
But don’t you worry, we’ve got your back. We’ll go over the most essential things to remember if this is your first time managing your own credit card, such as practicing responsible spending habits, choosing the best card with the best conditions, and understanding how to stay on top of your statements so you don’t wind up in debt.
- Make a Budget
A credit card is a convenient tool to make purchases and get rewards, but it should never be used to purchase anything that you cannot afford. Having a realistic sense of how much you can spend and pay off at the end of the month can discourage you from going overboard.
Try a budget like the 50/30/20 strategy, which recommends spending 50% of your take-home salary on basics like housing and groceries, 30% or less on stuff you like but don’t need, and 20% or more on savings and debt repayment. This will assist you in keeping your credit card spending in line with your income and other savings and spending objectives.
- Maintain a Record of Your Purchases
The first step is to determine how much you can afford to spend. Following that, be vigilant in tracking your purchases throughout the month, maybe using your credit card’s mobile app or website. Once you’ve reached your monthly spending limit, discontinue using the card until the debt is paid off. This type of discipline aids in the development of a solid credit score and the avoidance of credit card debt.
- Set Up Automatic Payments
It might take some time to become used to paying a payment on a monthly basis. Avoid late credit card bills by setting up automated payments ahead of the due date. Make sure the planned payment is greater than the minimum payment—ideally, for the entire balance—and that you have sufficient cash in your checking account before the payment is scheduled. You may be charged a late fee or a returned payment cost if you do not comply. 1
Payment history is the most essential component to your credit score, which is a three-digit figure used by lenders to analyze your credit utilization. To keep your credit score high, pay off all of your credit card bills on schedule.
- Use as Little of Your Available Credit as Possible
It might be tempting to charge up to your credit limit on your credit card, but it is critical not to. Credit usage, or how much of your credit limit you’re using, is the second most important factor in determining your credit score. Carrying a significant credit card bill from month to month might harm your credit score. Furthermore, it might provide the groundwork for incurring credit card debt, which can take a long time to repay.
- Each month, pay your bill in full.
Your credit card company simply demands the minimum payment, which is a proportion of your outstanding debt. While this may appear to be an easier and less expensive option than paying the entire amount owed, it will cost you money in the long run. 4
Paying only the minimum each month adds interest to your amount until you pay in full. Because a percentage of your payment is used to accumulated interest, your debt will only reduce by a tiny amount each month. What’s the bottom line? To prevent incurring interest, pay your debt in full each month.
- Regularly review your statement
Your credit card company will give you a statement each month that outlines your transactions from the previous payment cycle. Even if you’ve planned your monthly payment, it’s crucial to read your billing statement. You should go over your statement to look for any inaccuracies or illegal expenditures. If you see one of these, contact your credit card company right once to get them resolved.
You may review your transactions in real-time and discover issues far sooner if you open an online account or download the card’s mobile app. You may even set up alerts to detect questionable activities right immediately.
- Redeem Points
Make sure you understand the rewards program if you’ve picked a rewards credit card as your first credit card. Increase the amount of cash back or points you get by spending in the most rewarding categories, such as petrol or restaurants.
Then don’t let your awards pile up. You may redeem rewards for a statement credit, a check to your bank account, travel, hotels, gift cards, and more, depending on your credit card. Some incentives have an expiration date, which means you must spend them before they expire. Check the small print on your card to see whether it has an expiration date.
- Use the Extra Benefits
In addition to cash back or travel incentives, many credit cards provide other benefits. Many credit cards include rental vehicle insurance, waived checked baggage fees, travel insurance, price protection, which gives a return if an item’s price reduces after you acquire it, and extended warranties, to name a few advantages. If you have any questions concerning the benefits of your credit card, log in to your online account and study your credit card agreement, or call customer care.
- Understand Your Fees and How to Avoid Them
Except for an annual charge, you may avoid the bulk of credit card costs by avoiding specific activities. For example, you can avoid a late charge by making your payments on time. To avoid a cash advance charge, skip the cash advance. Choose a card that does not impose foreign transaction fees for transactions made overseas.
- Install the Mobile App
You may manage your credit card account on the move by using the mobile app for your credit card. You may access your account at any moment to examine your balance, check your available credit, ensure that your payment was received, and more. Much of this could be done through your phone’s browser, but applications are more convenient.
Having a positive connection with your credit card is an important aspect of creating a solid personal financial profile. The more time you invest now in learning how to handle your credit card correctly and wisely, the better off your personal finances will be in the future.