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Tips For First-Time Credit Card Users

It is almost a rite of passage for finances that you get a credit card. Many of us look forward to the first credit card. It seems like a big step, and it really is if you want the credit score that it takes to buy a house or a car at a good interest, according to financialhighway.com.


It is important to understand that a credit card is not your money. It is money you borrow from the credit card issuer. This means that you have to repay the money. While credit cards can be great tools for your finances, including helping you manage your cash flow, you do have to be careful, since it is easy to fall into the debt trap.


If you are preparing to use your first credit card, here are seven tips to keep in mind — and they are not bad reminders for those who have credit cards for a long time:

Create a budget and stick with it

The most important tip for first-time credit card users (and for anyone) is to have a plan for your money. Create a spending plan, or a budget, and stick with it. Your credit card should be part of this budget. If you stick to your spending plan, you will be less likely to find yourself over-leveraged with debt. If you can’t afford it in your budget, don’t use your credit card to buy it.


Pay off the balance each for month credit cards

If you are using your credit card within the confines of your budget, it should not be a problem to pay off the balance each month. You should pay off your balance every month in order to avoid interest fees. Carrying a balance results in interest, and that can start to add up and eat away at your wealth. Make sure that you can pay off what you put on your card.


Don’t get too excited about a credit limit increase

A credit limit increase can seem like an exciting reward. However, after a few months of responsible behaviour, you might receive a higher limit. While a credit limit increase can help your credit score due to a better-looking credit utilisation, you shouldn’t spend up to your new limit.


Avoid cash advances

The interest rate on cash advances is often higher than your purchase APR. On top of that, you might be charged a fee for the cash advance. Plus, if you get the cash advance at an ATM, you will have those fees to pay as well. A cash advance can quickly become an expensive proposition. Live within your means so that your bank account can be the source of needed cash.


Pay your bill on time

One of the most important things you can do is to pay your bill on time and pay at least the minimum. Late fees can add up quickly, and last payments don’t look good on your credit report. In fact, your payment history is the most important influencer of your credit score.


Pay attention to what your bank sends to you

If you want to keep up with the changes to the terms and conditions of your credit card, you need to pay attention to the materials your bank sends you. Don’t ignore the new credit agreements. Issuers have been providing notice to add annual fees, and increase other fees. If you want to know what is happening with your card, you need to pay attention.


Don’t casually share your credit card information

Remember to keep your credit card information private. Don’t give out your account number or other information to people who ask for it online via email or chat, or who call you and ask for it over the phone. Only provide information to those you actually contact for a specific purpose. When using your credit card online, verify that you are on a secure site before entering your credit card information.


Ways poor credit can cost you financially:


Pay more in interest


Anytime you borrow money, you are required to pay interest. When someone lends you money, the goal is to earn, and that means that they charge you an interest rate. However, the interest you are charged is usually based on your credit rating.


Inability to access some products and services


Your poor credit might actually cost you in terms of opportunities to get products and services. You might want a specific credit card to help you get back on track or ease your cash flow, but you might not qualify because of your poor credit.


More on bad credit


In many cases, the things that come with poor credit — or that cause poor credit — add stress to your life. When you have a lot of debt and poor credit, and when you are worried about your financial situation and all the extra costs you are paying, it is hard to maintain healthy relationships. Your stress and anxiety can make you irritable, and you might be reluctant to share the full extent of the situation with a significant other.


In these cases, relationships suffer. Whether you yell at your kids more, or keep secrets from your spouse, it is not healthy for your relationship. Your mental and emotional health can also deteriorate as a result of the stress related to poor credit. If you are not careful, you could end up with costs that are even greater than the financial.

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