Tips for First Time Credit Card Users

Often young people inexperienced with credit get into debt way over their heads and then panic once they realize the mistakes they have made. It is wise to learn about credit before applying for it and once you are granted credit, using it responsibly, rather than try to correct mistakes later. A slow and deliberate approach to using credit is the best choice, especially for young people.

Finally, you have been approved for your first credit card! Congrats are in order, but so is a bit of advice. The granting of first-time credit by a bank or credit card issuer is serious business for you and them. From their perspective, you represent a reasonable risk and a potential smart credit user. You have the right to be proud of yourself because today, credit just is not that easy to get. The credit card companies know that you are new at the business of credit, and they try to be as cordial as possible to entice you into other offers that come your way, courtesy of them. It is one way the company will encourage you to begin using your card. If you allow their subtle innuendos to affect your credit behavior in such a way that you start abusing your credit, you will soon find you have a growing balance, and your payments will start very soon. Do yourself a favor and do not accept these offers just yet. It is best just to ignore them.

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Use their money instead of yours

To maximize the benefit of having a credit card, always remember to charge only that amount you can pay off completely before the next statement arrives. By using your card in this way, you can use the bank’s money interest-free. The opposite of this is allowing your balance to grow unabated until one day you reach your credit limit. To the bank, this is an obvious sign of irresponsible use of credit, and your credit score will reflect that. If you stick with spending only that amount you can pay off in one month, your credit score will stay high, and you will not become complacent about credit due to unnecessary debt and high interest payments. The best advice for young credit users is to keep your credit card balance as low as possible so the money will be available if an unexpected expense comes your way.

Watch your credit score improve

Another benefit of keeping your balance low is the positive effect on your credit score. Your score will be higher if you show a low outstanding balance with a high, unused credit limit with activity showing the balance is always paid in full every month.

If you carry a balance month after month, it is imperative to stay current on those payments. A better strategy is to develop a habit of paying more than the minimum payment, and always on time. In fact, the quicker you pay off the balance, the more money you will save and the better it looks for your credit score.

Monitor your credit score

Not knowing or understanding your credit score could present a problem in the form of higher monthly payments. As an example, assume for a moment you decide to buy a new car for that low advertised payment. Sounds good, you can afford it, and your car is lousy, so buying a car is a good idea. The shocker comes when the salesperson tells you he cannot get the best rate for you because of your credit score! It takes only a few credit score points to make a big difference in a credit decision. If you are planning a large purchase, be sure to check your score well ahead of time, so you have time to improve it before you sign the papers.