Getting a credit card for the first time represents a new level of spending capability, but just like getting behind the steering wheel for the first time, there are some things you need to know in order to use this new financial vehicle responsibly. Below are five helpful tips for handling your first credit card like a pro.
1. Know the terms!
Now that you have this powerful financial tool at your disposal, one of the first steps you will need to fully understand the terms of the card. This includes the credit limit, the interest rate, the fee schedule, and of course, the due date for payments.
2. Spend well below your credit limit.
First time credit card users are typically given a credit line of between $500 and $2,500. Whatever your given credit limit may be, make sure you spend well below that level or you can inadvertently max out your credit card and face potential fees. This does not bode well for your credit report, so stay on the safe side by keeping a nice cushion between your expenditures and your credit limit.
3. Pay the balance in full every month.
If at all possible, try not to allow any balance to carry over into next month. Pay it off in full every month so you can avoid potential interest charges. A large part of being smart with credit cards is never spending more on your card than you have available and pay off each month.
4. Always pay on or before the due date.
Credit cards are a great way to build or improve your credit score. However, late payments will hurt your score. Not only will past-due payments be noted on your credit report, but they can also lead to late fees. Additionally, several credit card companies include they have the right to increase your interest rate if you're late on even one monthly payment in the fine print of the credit card agreement.
5. If you have to make minimum payments, always pay more than the minimum amount due.
As mentioned earlier, the ideal scenario would be to pay off your balance every month. If this isn’t possible, do your best to pay more than the minimum amount due. This is one of the ways to saving yourself a lot of money in interest charges. By paying a little bit of extra money on top of the minimum payment, you start reducing the principal balance faster, which will mean less interest paid over the long haul.
6. Monitor your account.
We're living in an era where cyber-criminals have become quite sophisticated and identity theft has unfortunately become quite common. Stay on top of your accounts by regularly monitoring the activity so you don't get blindsided by a questionable charge on your card. For example, users who have credit cards in Cincinnati, OH should not be seeing charges for a gas station in Topeka, KS on their credit card statement (unless they've been on a recent road trip). Many credit card providers offer free email or text alerts to help you stay on top of your account activity, so take advantage of these tools to ensure the safety of your account. Take advantage of online banking at your financial institution to track your credit card activity
Applying for credit cards can be exciting for a first-time credit card user. This new financial tool comes along with a new level of responsibility. Be sure to keep the above tips in mind to help you successfully manage your first credit card with no stress or unpleasant surprises.
For an industry-leading credit card with no annual fee, low rates for purchases, zero percent introductory APR for the first year and more, contact the financial professionals at General Electric Credit Union.