Last updated: 23/07/2020 | Estimated Reading Time: 4 minutes
Five tips for first time credit card owners
In This Guide:
- Pick the right card
- Keep your card details secure
- Take control of your spending
- Keep track of your statements
Pick the right card
First things first: you’ll need to work out exactly why you want to take out a credit card and then pick one accordingly. There are a huge variety of different types of credit card available, each designed to suit specific purposes.
If you’ve got a poor credit rating and want to take steps to improve it, then you’ll want to take out a special credit building credit card. These cards are designed to allow you to borrow small amounts and ensure that you keep up with repayments and so come with low spending limits and relatively high APRs.
If, on the other hand, you want a card that allows you to spend relatively freely, allowing you the flexibility that your pay cheque might not on its own, then you’ll want a more conventional card.
If your ability to keep up with repayments every month is uncertain, then you’ll want to look for a card that comes with as low an APR as possible or even one that offers 0% on purchases.
If, on the other hand, you are confident of your ability to pay back your balance each month then you could opt for a card that offers rewards for spending like airmiles.
Keep your card details secure
It might seem simple, but it really is crucial that you keep all of your card information safe and secure. Credit card fraud is a big problem throughout the world and so you want to make sure that you’re not making it easy for con artists to steal your identity and spend your credit.
Take control of your spending
The idea of a credit card is to allow you to spend money that you don’t have in order to give you an increased degree of financial flexibility. The upshot of this is that you need to be fairly disciplined in order to stop yourself falling into a deep spiral of debt.
Beyond the imposed spending limit, there is nothing to stop you spending far beyond your means on a credit card – it’s all on you. If you don’t think that you’d be able to control your spending well enough, then perhaps a credit card is not the best idea for you. If used correctly, credit cards are a valuable tool in anyone’s financial arsenal, but if not, they can end up a cause of debt and stress.
Most credit cards will allow you to make cash advances by withdrawing money from an ATM. What you are getting when you do this is essentially an expensive short term loan from the credit card issuer.
While a cash advance might seem like a good short term solution to a reduced cash flow, they tend to come with very high interest rates and other charges. Unless it is absolutely essential, you should avoid ever making cash advances on your credit card.
Keep track of your statements
It is important to go through your credit card statements that should be provided to you each month by your card issuer.
This will help you in two ways:
First, it will help you keep track of your expenditure so you can balance what you spend and what you can afford to pay back more accurately.
Secondly, it will help you spot any fraudulent activity that may or may not be occurring. If you see any charges on your card that seem suspicious, however small, you should report them immediately to your card issuer so that the problem can be addressed quickly and effectively.
Timing is crucial when it comes to credit cards, both in terms of setting your due date and in terms of making sure you are able to pay off your debt when the due date comes around.
Ideally, you want your due date to be around a week after your payday. This will allow you to pay off your credit card bill when your monthly bankroll is at its highest, with a few days leeway just to make sure you’ve got the money in your account.
It’s really important to make sure that you do keep up with your monthly payments to the best of your ability. If you’re struggling regularly to pay off your credit card debt each month then you should consider taking out a balance transfer card that allows you to put off paying interest for long enough for you to clear your existing debt.
Interest is added from the moment you are late with any payment and will keep being added until you clear your debt. To avoid entering into a downward spiral of owed money, make sure that you set an appropriate spending limit and due date when you take out the card, and make sure that you don’t spend too far beyond your means once you’ve received it.