Sound Advice for First Time Card Users

The first thing that you’re going to want to do when you get your first credit card is to go out and use it. The last thing that you’re going to want to do is to listen to the advice that other people have about using the card. Nevertheless, a credit card is a big responsibility and if you’re wise, you’re going to pay attention to the things that other people have to tell you about making good choices when using a credit card.

Here is some of the best advice out there to follow when using your first credit card:

1. Don’t max it out. This is the biggest mistake that people make on a first credit card. It’s just something that’s really easy to do because spending money comes naturally to most of us and the limit on the first credit card is usually fairly low. It’s a bad idea for a number of reasons. It negatively affects your credit. It creates debt that’s hard to pay off. It can put you close to incurring an over-limit fee which further exacerbates those other problems. Whatever the limit of the card is, make sure that you don’t use more than half of that limit without paying it off

2. Create a budget that you can reasonably pay off. Yes, this is boring and it takes all of the fun out of having a credit card but you need to do it anyway. There are two types of budget plans that you can consider. The first is to create a monthly limit for your spending so that you’ll be able to pay off the total amount of the credit card debt every single month. Obviously, the limit has to be less than the amount you earn each month. This is the right budget for someone that is using the credit card on miscellaneous purchases. The other type of budget is designed for times when you need to make a big purchase. The credit card can be really useful for those but it requires that you make a plan in advance for how much money you’ll pay down on that every month in order to pay it off as quickly as possible.
3. Pay your other bills with the card. To establish a good credit history, you need to use the card regularly. The best way to do that is to schedule other bills, such as cell phone bills, to be automatically paid by the credit card. Of course, pay these bills off immediately so that you’re not paying interest on your other bills.
4. Don’t cover a group’s bills with your credit cards. Groups of friends often go out together and get a single bill at places like restaurants and bars. In almost all cases, the person who pays for the whole bill with a credit card will get shortchanged by the people who are supposed to pay him back in cash. Don’t do this. Pay your own part of the bill separately if you have to pay on a card. Don’t let other people drag you into debt.
5. Take the time to learn about the card. There is a lot to know about a credit card so don’t just throw away that information pamphlet that they send you. The interest rate on the card, the reasons that you might be charged fees and the services (such as fraud protection or rental car insurance) that are available on a card can all be learned about just by reading that paperwork.

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This entry was posted on Tuesday, June 24th, 2008 at 8:46 am and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.