Tuesday, 30 October 2018

Getting your first credit card is an exciting financial milestone.

But while a credit card can offer lots of perks and advantages, it also comes with some serious responsibilities. In fact, how you handle your first credit card can have a big impact on your financial life for many years to come.

Even though it's quite easy to swipe, sign, and worry about the payments later, it's important to remember credit cards are not free money. Try to remind yourself that every time you use your credit card, you're taking out a loan you will have to pay back.

With that in mind, here are some tips for using credit cards responsibly:

Use your card sparingly

Using your first card selectively is a great way to begin establishing credit history. Try using the card for smaller purchases and paying off the balance each month. Truth is, you should always try to pay your balance off in full each month. This is the only way you can avoid paying interest — which can add up quickly.

With most credit cards, you have the option of making a minimum monthly payment. But if you make only the minimum payment and continue to use the card regularly, you could find yourself with a big balance that could take years to repay. This can also have a negative impact on your credit score.

Pay on time

Your first credit card is often one of your first opportunities to prove you'll be a creditworthy citizen. Missing a payment — or even being late with a payment just once — can do more harm than you might think. It can result in fees, rate increases, and damage your fledgling credit score. To help you make your payments on time, consider setting alerts or having your payments made automatically each month.

Monitor your credit card activity

This is possibly one of the most important responsibilities of having a credit card. Regularly checking the transactions on your card will enable you to stop unauthorized activity as soon as possible. More than 15 million Americans were victims of identity theft in 2016, an increase of 16 percent from the previous year, and much of the stolen information came from credit cards. Most credit card issuers offer online tools to help detect fraud quickly.

Don't overspend

This is a no-brainer. Credit cards are supposed to add flexibility and convenience to your life, not enable you to live beyond your means. One of the best ways to avoid overspending is to make a budget and stick to it. While pulling out the plastic might make for a fun evening with friends or a fabulous shopping spree, the fun ends when you open your credit card statement a few weeks later and see a big balance you can't pay off.

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