Credit cards can be incredibly useful tools. Properly managed, you can even come out ahead. However, poor card management can quickly get you into a tough financial situation.
Cover Your Needs, Not Your Wants
If you don’t have the money in the bank to cover the purchase, don’t put it on the card. Once you get your first bill, you should have the data you need to easily make the payment. To start, it may be easier to make the purchase, review the receipt and make the payment to cover that expense within 24 hours so you stay aware of how much you’re spending on your credit card.
According to the professionals at SoFi, a starter credit card is a wonderful tool for building credit. When working out how to get a credit card for the first time, it’s a good idea to get into the habit of paying off the balance in full each month.
Save Up First
Once you have your first credit card started, other offers will come in. Go ahead and review them because they may save you money down the line. For example, if you’re in your first apartment, you will need some furniture to start. If you have enough in savings to cover a bed and a dining table, find the card that offers either an introductory bonus or bonus points for something you will use.
Go ahead and buy your necessary furniture with the new card, staying under your savings amount for this shopping trip. Pay the bill in full when it comes in. Use the incentive points for a flight, a hotel stay or a gift card for something else you need.
Get In A Bill-Paying Habit
Late payments of all kinds can have a negative impact on your credit rating. Over time, a poor credit rating will
- limit your ability to move
- cost you more in insurance
- make other debt more expensive
If you need a new car and your credit rating is good, you can get a cheaper loan and buy a better car for the same money. If your credit rating is terrible, you will end up making a higher payment and may not be able to borrow at all from some lenders.
Don’t Max Out Your Cards
Another negative hit on your credit rating is having poor credit utilization. If you only have one card and it’s always maxed, it will be harder on your score than if you have three cards at only 30%. If you can’t pay it off each month, make the minimum as soon as the bill comes in to avoid penalties and put as much as you can on the debt when the next bill comes in.
Monitor Fees
If you have to get a card with an annual fee, set an alarm on your phone to cancel it in 11 months. Late fees and over-limit fees are a terrible waste. Some cards with annual fees can be a good deal, but if you can avoid them, do so.
The biggest rule to follow with regards to credit cards is that if you don’t have the money in the bank, don’t put it on the card. It’s not a savings account. Use it to buy what you would have bought with cash and pocket the incentives.
