Getting your first credit card can be a big step in your financial journey. While you may be versed in the basics of how credit cards work, there are some practical credit card tips for beginners that may be helpful to know as well. Let’s learn more about some key tips to keep in mind as you start using your first credit card.
Tips for a new credit card user
When it comes to advice for first time credit card users, one of the most important things to do is make sure you’re educated on your card so that you can use it responsibly and get the most out of it. Below are some other important tips.
Autopay
Most credit cards offer an autopay feature. This means that each month on your credit card bill’s due date, your issuer will be able to automatically withdraw funds. There are usually different settings for autopay, meaning you might have the option to have the issuer withdraw the minimum payment, full balance, or another specified amount each month.
There can be a couple of key benefits to using autopay. The first is just to lighten your mental load. While it’s always important to stay aware of your payments, not having to manually pay your bill each month may just give you one less thing to worry about. Another benefit of autopay is that it helps to make sure you’re paying your bill on time each month. Payment history is a large portion of your credit score, so making at least the minimum payment on your credit card bill on time every month can contribute to a good payment history. Just make sure you have enough money in the account being withdrawn from to cover the amount you set up for autopay every month. Otherwise, you may miss out on these potential benefits.
Watch your credit card utilization
Credit card utilization is another important factor of your credit score. In short, credit card utilization is the percentage of your available credit that you’re using. For instance, if your credit limit is $1,000 and your balance is $250, then your credit utilization is 25%. This is something to keep an eye on, as lower credit utilization is better for your credit score. It’s generally accepted that 30% or less is the ideal.
Don’t overspend
This tip may seem obvious, but it can be easy to spend a little more money than you currently have, thinking you’ll catch up after your next paycheck. This can, however, leave you with a balance you can’t pay off each month. This often means you’ll begin accruing interest charges, which can make it increasingly difficult to pay off your debt.
To avoid falling into this cycle, you may want to think about using your credit card like a debit card. Only spend as much money as you actually have at that moment, and try to only use your credit card for planned purchases within your monthly budget. You can also pay your credit card balance off multiple times in a billing cycle. That way, it may help you keep up with your spending by paying off your balance every time you use your credit card, at the end of each week, or however often helps keep you on track. This will also help keep your utilization low.
Stay on top of special offers
If you open a credit card with a special offer, such as low APR as an introductory offer, it might help to mark down when the offer period ends and the regular terms and conditions kick in. There are a few different types of introductory offers or sign-up offers that you may be eligible for when you open a new credit card, but it’s important to know when the eligibility period ends. That will help you avoid any surprises, such as unanticipated interest fees.
Think about rewards
Credit card rewards may seem like one of the more exciting parts of opening a credit card. If your current credit card doesn’t offer rewards, you may potentially upgrade to a card with rewards once you’ve built your credit history up. Once you choose a card that will reward you for the type of spending you do most, try not to put your desire for racking up points over having a responsible credit card utilization ratio or a good payment history.
Benefits of opening a credit card
If you’re a new credit card user, you may have questions about what some of the benefits to having a credit card are. Learn more about the following benefits:
- Building credit: Credit cards can be a great way to build credit, which will likely be useful if you hope to open other lines of credit, such as getting a mortgage or auto loan.
- Feeling more protected: Credit cards might offer solid protections for consumers, such as zero liability fraud protection on unauthorized purchases. Additionally, federal law limits consumer liability for unauthorized purchases to $50.
- Getting rewarded: If you have a rewards credit card and use it responsibly, you might find you rack up rewards just by making your normal, budgeted purchases. You might even be able to redeem these rewards for things like hotel stays, flight miles or cash back.
In summary
When it comes to credit card tips for beginners, the most important things to remember are to use your card responsibly and remember the ways your usage can affect your credit score. Paying at least the minimum payments on time each month can potentially improve your payment history, while keeping a low balance could improve your credit card utilization. It’s also helpful to keep the length of your credit history in mind when upgrading your credit card. Using credit cards can have many benefits, as long as you’re responsible and educated.
