No matter what age you are when it happens, getting your first credit card is an exciting financial milestone. It can be the start of building positive financial habits and good credit, or it can lead to a cycle of revolving debt that’s hard to overcome. What happens from this point forward is up to you. Here some tips for new credit card users to help you make good decisions.
Start Small
There’s a simple, proven way to use a credit card to help build good credit: use the card to make a few small purchases each month, then pay off the balance in full. This keeps the card active, shows creditors you can be trusted to manage credit responsibly, and keeps you from paying interest. A good way to do this is to have one or two streaming services billed to the card, then paying off the balance every month.
Automate Everything
As soon as you activate your new credit card, sign up to receive fraud alert notices via text and/or email. You’ll also want to set up automatic payments so that you never miss a payment or pay late. Establishing a record of on-time payments is one of the most important things you can do to build and maintain a positive credit history and score.
Read the Fine Print
Be sure to understand all the terms and conditions surrounding your new credit card. Familiarize yourself with the card’s interest rate, late payment charges, and purchase protection. If it’s a rewards card, learn the details of how and when you can earn and use your points, miles or cash back.
Don’t Overextend
Your new card’s spending power can make it tempting to purchase thing you couldn’t otherwise afford. But that’s how the trouble starts. Once you start using the card to spend money you can’t pay back right away, interest will begin to accrue. This can quickly spiral out of control and plunge you into a cycle of revolving debt that will make it difficult to work toward other financial goals.
Review Your Monthly Statements
Whether you review a hard copy or go paperless and conduct business online, be sure to open and review your credit card statement every month. It’s the best way to keep track of your account and catch any mistakes or fraudulent activity. Review all transactions, credits and payments to confirm the amounts and that they were applied to your account properly.
Watch for Fraud
If you noticed unauthorized charges on your account, don’t panic. Federal law protects you from liability for any fraudulent activity greater than $50. If you notice charges you didn’t make, contact the credit card company right away and check the activity on all your other financial accounts for additional signs of fraud. If you suspect identity theft, file reports with your local police department and the Federal Trade Commission (FTC).
Pace Yourself
After you’ve successfully managed your credit card for several months, you will probably start to receive offers for additional credit. Be careful about taking on too much, too soon. You don’t want to get in over your head. Plus, each time you apply for credit, the hard pull of your credit report can result in a temporary drop on your credit score. To remove temptation, you can opt out of receiving pre-screened credit card offers by visiting OptOutPrescreen.com
