Top Tips for Using Your First Credit Card: How to Avoid Falling into Debt
Getting a credit card is a sign of stepping into the demands of adulthood. It can be the right step toward building a secure financial future and establishing an excellent credit score to improve your quality of life and provide better opportunities.
That said, your credit card can also lead to burdening years of paying off a mountain of debt, which is why you should be vigilant when using your first credit card and not be reckless by contributing to an “everything now” society.
Credit cards, however, don’t have to be scary, and it is essential to have a healthy relationship with them. Before using your first credit card, here are some tips to guide you along the right path:
Set a budget!
Credit cards exist as a convenient way to make purchases and earn rewards, but it should never be used to buy things you can’t afford. That’s why you should set a realistic budget for how much you can spend and pay off at the end of the month.
A smart way to set a credit card budget is the 50/30/20 Method.
- 50% of your money to be spent on necessities like housing and groceries
- 30% of your money to be spent on items you don’t necessarily need but you want
- 20% (more) to contribute to your savings and paying off debt
This method is an excellent way for any credit card holder, to follow which will keep your spending in line with your income and other savings and spending priorities.
Keep track of your spending
Before using your credit card, you should calculate how much you can afford. Once you have made this calculation, be cautious about your purchases throughout the month.
Keeping track of your expenses has never been easier, as your card issuer will have a mobile app or website for you to track any time you want.
If you have reached your spending limit, then you should avoid using the card until the balance has been paid off to prevent any financial hardship.
Without discipline, you will fail to build a good credit score, and you could find yourself falling into debt.
One of the most useful tips for credit card holders is to protect yourself from late credit card bills by scheduling automatic payments ahead of your due date.
It is best if your scheduled payment is more than the minimum amount and that you have enough funds in your checking account before the scheduled payment. If you ignore these tips, there is a chance you will be charged a late fee or a returned payment fee.
The payment history of any credit card is one of the key factors to determine how good or bad your credit score will be. That’s why you should aim to pay every single bill on time to prevent any decline in your score.
Your card payment will be due on the same date each month, which makes it easier to follow.
Avoid maxing out your credit card
Credit utilization is the second most significant threat to your credit score. That’s why you should avoid engaging with a large credit card balance, as carrying it from month to month, can impact your score.
It can be tempting to max out your credit card, but, with emphasis, resist the temptation. Avoiding a maxed-out credit card prevents the misery of debt that can take a long time to pay off.
Check your statement regularly
Your credit card issuer will send a statement that illustrates your transactions from the previous month. Even if you’ve scheduled your monthly payment, it is advised to read your billing statement in full and leave no stone unturned.
It is vital to confirm your statement is as you recall and to spot any errors or unauthorized charges, which then should be reported to your credit card issuer immediately to be cleared up.
You should know that most credit cards come with a $0 liability guarantee, which means you won’t be held responsible for fraudulent charges. However, that guarantee could be lost if you don’t address any statement anomalies.
Revise your fees and how to avoid them
You will, of course, have an annual fee, but you can dodge the majority of credit card fees by being diligent with your behavior. Late fees can be dodged by making payments on time and foreign transaction fees can be swerved by opting for a card that won’t charge you.
We would suggest reading the terms and conditions of the fees that come with the card before opening an account.
Download the mobile app
The modern world is useful for its technological advancements; if you are reading this, you most likely have a smartphone that has a mobile app for you to keep track of your account.
You can log in any time to view your balance, check available credit, confirm payment has been posted, report lost or stolen credit cards, and more. The mobile app is designed for fast and easy access to all things credit.
After reading through our top tips for using your first credit card, we think you will be on the road to a successful credit score and an optimistic, prosperous future.
If you face any problems after opening your credit card, it is always best to talk to someone to tackle the issue instead of letting it worsen without acknowledgment.