Once you get your first credit card, it can be tempting to keep using it even if you have cash. After all, it is more convenient to use: you don’t have to keep a wad of cash in your wallet, especially if you want to buy something really expensive.
If you have a cash back credit card, you will even be more enticed to use it frequently to get rebates or cash backs and other great benefits.
Although getting your first credit card can really be exciting, you need to dampen your enthusiasm a bit. If you don’t, you may find yourself using your charge card too much that you will soon have a hard time paying for what you charged to it.
To avoid running into any problems with your credit card, you need to know how to use it responsibly. Here are some tips for doing so:
Use your credit card to buy items you are sure you can pay for
Although it may be tempting to buy a new mobile phone or a new designer handbag, avoid making impulse purchases. If you don’t have the money now to buy something that pricey, using your credit card to pay for it is not a good idea either.
Since you don’t have enough cash to pay for it now, you will have a hard time paying for this purchase down the line. Ultimately, you will find yourself in a debt spiral or a situation where you have constantly increasing levels of debt. This will have repercussions on your finances and credit records.
Pay off as much as you can every month, on time
The best way to avoid owing a large credit card debt is to pay off the balance every month. If you don’t, you will end up paying more than you have to.
This is because if you choose to only pay the minimum payment due or do not pay anything at all, interest rates that fall between 14 and 25 percent of the balance will be added to next month’s bill.
To avoid these high interest rates, pay off your balance every month. If you can’t, pay an amount significantly higher than the required minimum payment. This will still allow you to reduce the finance charges you will be hit with.
Additionally, make sure you always pay on time to avoid late fees. This is also one of the best ways you can improve your credit score.
Review your credit card statement as soon as you receive it
Going over your credit card statement when you receive it is a habit you need to develop. This practice will help you keep your spending under control.
When you know which items regularly appear on your statements such as your expensive daily cup of coffee or your shopping splurges, you will know where you should start curbing your spending.
You will also do well to keep all your receipts and compare them against the statement you will receive. When you do this every month, you will be able to spot and report any errors or inconsistencies immediately.
Avoid going over your credit limit
Going over your credit limit is something that you shouldn’t do intentionally or unintentionally.
If you go over your limit, you will be charged an over-limit fee as specified in the credit card agreement or application you signed. Aside from paying for these charges, your credit rating will also be damaged especially if you do this habitually.
To avoid costly charges and other headaches that come with using your card more than you should, keep track of all your credit card charges throughout the month, and stay within your credit limit.
Do not use the credit card cash advance facility
Lastly, do not use your credit card to get a cash advance except in extreme emergencies. And if you do use it, make sure you pay the amount back in full immediately.
This is because when you get a cash advance, you will be charged interest from the date you withdrew the money until the date you repay the amount in full. This means that most cash advances do not come with the 21-day grace period of regular purchases. As such, it is best to avoid cash advances altogether.
As a bonus tip, you can be sure you will get more from your credit card without paying for high charges if you get one with a low annual fee and low interest rate.
If you are applying for your first charge card, make sure you study the different credit card offers and choose the best one that fits your lifestyle and budget.