Getting your first credit card is exciting. It immediately increases your ability to make purchases, and gives you access to multiple benefits –– like being able to earn cash back or bonus miles on flights. But it’s also a great responsibility that could have a big impact on your future.
If you’re just getting your first credit card, here are five important things to know.
1. You Have Plenty of Options
At a certain point in your life, you’ll be contacted by banks offering you credit cards –– and it’s important not to rush it. Banks will offer you substantially different conditions when it comes to the interest rates and additional charges applied to any given card. CNBC recommends considering annual fees and foreign transaction fees as well. All in all, it’s wise to simply take the time to review options and conditions, ask friends or family with cards what they’d advise, and generally do your due diligence.
2. A Good Score Will Benefit You in Real Life
In the future, you may want to get a loan to buy a house, or pay off student debt. However, the size and interest rate of this loan will depend in part on your credit score. As we mentioned in ‘5 Tips to Improve Your Credit Score This Year’, having a long record of paying off multiple types of credit on time will improve your credit score –– which in turn amounts to better opportunities when you need a loan or want to apply for a better card. s
3. Many Factors Go Into Your Score
There’s a certain amount of common sense involved in keeping your credit score up. If you use your card and make your payments, you’re likely to maintain a decent score. However, there are numerous other factors that impact your standing as well. AskMoney’s intro to credit scores points to things like the total amount you owe, the different types of loans you’re paying off, the length of your credit history, and –– yes –– your payment history, all as elements that factor in. Some of these things weigh more than others early on, but it’s best to keep them all in mind.
4. Pay More Than the Minimum
One of the advantages of a good credit card is that it offers you reasonable payment conditions. Instead of having to pay everything you owe immediately, you can just pay the minimum amount required each month. However, if you make an effort to pay a bit more, part of the money will go to pay your actual debt and not just the accumulated interest. Plus, it will help that credit score!
5. Avoid Cash Advances
Some banks allow you to withdraw money using your credit card. A lot of people take advantage of this option, assuming that the interest and charges attached to the transaction won’t differ much from a normal purchase –– but this is not the case. As Forbes reminds us, withdrawing money by using a credit card is expensive. Avoid doing it and you won’t have any problems keeping your credit in check.
It really is exciting to get that first card. As much as that’s the case though, card use can easily get out of control, leaving you struggling to make payments and maintain good scores. But by remembering the tips and factors discussed above, you can ensure responsible use from the start.
