Getting your first credit card can be an exciting event, and it sends the message that you are ready for some serious financial responsibility. While opening a credit card account can help you to build a strong credit card history and allow you to afford items that you might not be able to buy otherwise, there are several things you should consider before you use your new card. There are many mistakes that first-time credit card holders make, and any one of the can adversely impact your credit rating. Keep the following credit card tips in mind before you pull the plastic out of your wallet.
Don’t Carry a High Balance
First-time credit card holders usually get introduced to their new account with a small line of credit. This is designed so that banks don’t take on too much risk with you as a new cardholder, and it also helps the banks see how you will handle your new account. One of the worst things you can do is to max out a new credit card. Part of your credit rating is calculated by considering the percentage of available credit you have every month. A cardholder who uses only 20 percent of any available credit will have a better rating than the person who uses 90 percent of available credit. Keep your purchases small, and if you do charge more than you planned to, be sure to make a substantial payment to keep your credit report clean.
Make Sure You Can Afford the Monthly Payments
The more you spend, the higher your monthly payments will be. If you aren’t sure how much your payment will be, take some time to figure it out before you make a purchase. If your payments are late or you miss a payment, you can risk your good credit history and end up paying for extra interest and fees.
You can determine how much you must pay by using an online credit card payment calculator, though some credit card companies will give you a breakdown of what your monthly payment might be based on your spending. Remember that a portion of your monthly payment will go to pay interest on your balance, so you may want to budget a higher monthly payment to get the balance pad off more quickly.
Don’t Allow the Balance to Carry Over Month to Month
One of the best ways to keep your credit history in good standing is to pay off your balance every month. You won’t have to pay interest and you will keep the percentage of available credit high. If you make purchases that are beyond your means due to an emergency, be sure to pay as much as possible until the balance is paid off.
Monitor Your Credit Card Usage
Identity theft is big business, and if you don’t pay close attention to your statements, you may not realize that someone has used your account for unauthorized purchases. An easy way to monitor your accounts is to sign up for email or text message alerts that notify you when a transaction has been completed with your card. While it may seem redundant to get notice of purchases you have already made, you will appreciate knowing instantly when an unauthorized purchase has been approved. Identity theft can quickly destroy your credit history if you aren’t vigilant.
Do Not Authorize Anyone Else on Your Account
Whether you have a co-signer or an authorized user, having a second person on your account can be a very bad idea. When the credit card account is in your name, you are responsible for all purchases made by the approved user, which means that you could end up paying for items that you never wanted to purchase in the first place. If you do authorize a parent or spouse to have access to your account, consider limiting the amount that an approved user can spend or sign up for email notifications of those purchases.
To protect your credit history and manage your finances, you should avoid making mistakes with your credit card usage and payments. Following these tips will allow you to secure a positive credit history and ensure that you always have an emergency line of credit available.