So, you finally got a credit card? Awesome! Credit cards are fun and convenient, you can also count on them whenever you’re financially challenged. However, as the famous Spiderman quote goes, “With great power comes great responsibility,” it is essential to remember that credit cards must be used carefully.
To help you have an amazing and trouble-free experience, here’s a list of the top 20 credit card tips that all first-time users like you must know.
1. Establish Your Budget (And Stick To It)
While the buy-now-pay-later premise of credit cards is undoubtedly tempting, you must do your best to only purchase what you can afford. Setting a budget – and sticking to it – can help you save money, minimize card debt, and build a good credit score.
2. Always Pay Your Dues in Full and On Time
Paying off your bills on time can help you get the most out of your credit card. Aside from not having to face compounded interests and other extra fees, you will also get more rewards and even retain/improve your card standing.
3. Limit the Number of Credit Cards You Use
Having multiple credit cards has its own benefits, including a lower debt utilization ratio and inclusion to different rewards programs set by card issuers. However, it is not recommended for first-timers to get as many cards as they can because it could hurt their credit score in the long run.
One way your credit score gets ruined is when your total balance goes past 30% of your card’s limit. Another is when you have too many cards, you are more prone to delayed payments, and that can lead to a bad credit score.
Other ways that multiple cards can hurt your score include opening too many accounts in a short amount of time and also closing accounts even if you don’t use them anymore.
4. Mind the Interest
Another common mistake that most first-time cardholders make is not minding the interest. A lot of banks charge an interest rate of 16.27% (may vary depending on the bank, card type, tracking date, and item/services availed) that can grow over time if you don’t pay your dues.
Compounded interest will bury you in debt, and you would not want that to happen.
5. Read the Terms & Conditions
An update on the terms and conditions of your bank can affect how you use your credit card. That’s why you have to make sure that you will read the alerts and documents sent to you by your bank or card issuer. And yes, that includes the fine print.
6. Don’t Go Anywhere Near Your Card’s Limit
A lot of newbie credit card users think that the small piece of plastic they are holding will be enough for them to buy almost anything they want to, that is wrong.
Credit cards, depending on their type and issuer, carry a certain amount of limit that you must not reach. Maxing out your credit card can give you a bad credit score and a debt that you will not be able to pay off right away.
7. Set-Up Automatic Payments
To avoid late bill payments, you can link your bank account to your credit card. That way, your card balance will automatically be paid off once the due date arrives.
8. Look Out for Fees
Believe it or not, banks draw a considerable amount of money from the fees they impose on their credit card users. From annual and late payment to balance-transfer and over-limit, these extra charges can range from a couple of bucks to more than a hundred dollars.
So, before you even use your card for the first time, make sure to read all the possible fees you will have to pay for and those you can avoid.
9. Don’t Be Fooled by A Credit Card Limit Increase
An increase in credit card limit is very appealing especially to first-time credit card users. And while it’s easy to look at it as you having more ‘money’ you can spend, you must still remember that it is just a loan and you will have to pay for it at some point. Again, only spend what you can afford.
10. Monitor Your Purchases
One good way to stick to your budget and analyze your spending behavior is to keep track of the items you bought using your card. This will not just allow you to calculate the amount you need to pay but also help you figure out the things you buy the most often.
11. Pick the Due Date That Works Best for You
Some banks allow their cardholders to pick the date where they have to make the payment. If presented with a choice like this, make sure to choose wisely.
It would be best if you can pick a date around 5-7 days after your salary comes so you would still have enough money to pay your monthly balance.
12. Think Twice Before You Avail A Rewards Card
A rewards card can also help you get the most out of your money. From cash and shopping sprees to gift items and travel discounts, you can get freebies depending on how much ‘reward points’ you’ve earned from your card issuer.
However, you must also keep in mind that they are expensive, so think twice – or thrice if you have to – if you can maintain them before you even get one.
13. Request for An Interest Cut If You Need It
What? I can do that? Of course, you can! Although the interest rates set by banks/card issuing companies are most likely to be ‘fixed,’ some allow adjustments once you ask or file a request.
Keep in mind that you will not always get this if you request it, but it can never hurt to ask.
14. Check Your Card for Extra Perks
Planning to purchase an insurance plan? How about an extended warranty period for something you just bought? Then check your credit card first just in case you can get one for free.
Some banks provide great benefits for their cardholders, including extended warranties, price protection, and different types of insurance. These things can cost hundreds of dollars, so being able to get them without paying a single cent is a must-grab opportunity.
15. Pay Off Your Balance with The Highest Interest First
For you to settle your debt faster, you need to prioritize your balance that has the highest interest. By doing this, you will be able to slow down the growth of the compounded interest that is applied on your entire card balance, making it easier for you to pay the rest of your dues.
Here is a great snowball debt excel spreadsheet for you to check out.
16. Always Check Your Card Statement
All credit cardholders will receive a monthly report that details all of their transactions during the previous billing cycle. When you get yours, make sure to check if everything that is included in the document is correct.
Try to look for errors and even unauthorized transactions so you can report them right away.
17. Download the Corresponding Mobile App
Linking your credit card to your bank’s app can make everything even more convenient. You will be able to view your account, process transactions, pay off your card balances, report irregularities, and more in just a couple of screen taps.
18. Track Your Credit Score
Your credit score serves as your freedom in the financial world. Keep it in a good state, and you will reap a lot of benefits, let it go bad, and your movements will surely be limited. Once your monthly statement arrives, look for your score and try to figure out how that happened.
You need to be aware of all the debt-related transactions and even bill payments you’ve done to get an idea of what you can do to improve your score even more.
19. Don’t Withdraw Money From Your Credit Card
Yes, you can also take money out of your credit card and use it like an ATM. However, you must be prepared for the high-interest rates and hefty transfer fees that you have to take care of. If you’re not planning to spend it on anything important, then please don’t make a cash advance, better save it for emergency moments.
20. Do Not Share Your Credit Card Info
You should keep your card details – especially your account number- to yourself at all times to avoid problems such as phishing and other scams. Don’t share any other personal info as well unless you know you can trust the person you are talking to.
When using credit card online, make sure to check whether the site is legit or not. One way to know whether the website is secured or not is the padlock sign located right beside the URL or if it starts with ‘https’ instead of the regular ‘http’.
These are the top 20 credit card tips that beginners like you need to be familiar with. Having a credit card is excellent for it provides you with another layer of financial security. However, knowing how to use a credit card responsibly is crucial for it can either be the best thing you never knew you needed … or your biggest nightmare.