A credit card is your saviour whenever you want to make that impulse purchase with no cash in your wallet. The urge even becomes stronger when you have your new credit card in hand. However, being reckless or getting carried away by tempting offers can lead to extensive billing and debt.
Usually, users who get their first credit card should know how to manage it wisely, so it becomes a blessing and not a burden.
There are various things to be taken care of while using your credit card, as mismanagement can directly affect your credit score.
Small things like making timely credit card payments for the entire amount can significantly affect your finances and credit score.
Here are some tips for managing your first credit card wisely and responsibly.
Tricks to use a credit card for the first time –
Once applied for a credit card, banks and financial companies send the cards over the mail, or one can check it in the online banking app. The credit card comes with a credit limit that users can use to purchase things. Credit cards are the by-products of the line of credit that gives borrowers access to a certain credit amount. The spent amount from the cards must be repaid at the end of the cycle, known as a due date. The minimum amount is five per cent of the total spent amount. This minimum amount must be paid within the due date.
Understanding the terms and conditions –
A credit card comes with specific terms and conditions. When one gets it for the first time, one should at least check the terms and conditions before making any purchase from the card. This will at least save the users from falling into any arbitrary loss. Checking the annual fees of the card is mandatory. The concerned person in the bank or the company needs to be contacted if there is any extra charge levied on the card in interest rate.
Setting schedule for the credit card usage –
Users should know how much percentage of the credit limit should be used. 30% of the credit limit can be used. This is how one can draw boundaries of their purchases. A reckless purchase without any schedule can harm the credit score. Users can set a reminder for their monthly credit card usage. Also, they can automate their credit card usage for groceries, bill payments, or anything that suits them within the 30% bracket. Unlimited spending would add an extra burden on the users and will add the interest rate if not paid within the due date.
Payments on time –
The advantages of credit cards are many if handled well. One such advantage is building a credit score by making payments on time. Setting reminders for the due date or automating the payment of the outstanding balance would be a practical decision to manage the credit history. First-time users have a higher chance of forgetting the due dates; hence, the reminder and automation work the best.
Purchases within credit limit –
First-timers should know their credit limits well. A credit card can bring temptations, and it harms the users primarily and push them into debt. To avoid such circumstances, one should be aware of credit limits and shop accordingly. It is better not to use the entire credit limit for long-term purchases because it may impact the credit score. Purchasing credit cards within its credit limit maintain healthy credit habits for the users.
Checking the credit card transaction –
Checking the statement for the credit card purchases would help the users understand how and where they spent their money. This is the exact process for building a good habit for the first timer. However, even the pro-users should adopt this habit. Otherwise, one could not recall where they spent their money. In this way, the over-spenders can change their purchasing habit. Otherwise, the credit limit and temptation can create huge debt for first-timers.
Most premium cards offer reward points that users can check from the bank’s website. To understand how to redeem credit card points, one needs to visit the respective bank’s website and search for it. Otherwise, these reward points lapse. Often, travelers need a credit card for their hotel and flight bookings where they can quickly redeem their reward points.
Awareness of cash advance
First-timers should avoid using the cash advance facility. These are the options provided by the lenders, which might seem easy to handle. But it creates lots of tension and hardships for the first-timers. A cash advance is a short-term loan provided on a credit card, which new users should avoid. This option comes with the fee and interest rate structure which can create a dent in the credit score if not paid as per schedule.