July 3rd, 2008 Jamie
So, you’ve weighed the options and decided to get a credit card. Congrats! This is just one more step into adulthood. Unfortunately it’s also another step into responsibility. Here are a few thoughts on choosing and using credit cards that should (hopefully!) make the process a little smoother. (Remember, I’m not an expert, but I have had some life experience!)
Choosing a Card
Your first card should have:
- The lowest interest rate possible. You should always try to pay your card off completely every month, but if you have an emergency and can’t pay off your balance, high interest rates can make your debt add up fast.
- No annual fee. Some credit cards-especially “rewards” cards-charge you a fee every year for the privilege of using them. You don’t need another drain on your already sparse savings, so look for a card that won’t charge that fee!
- No hidden charges. Read the fine print!
Since this is your first card-meaning you probably don’t have much credit built up yet-it might be hard for you to get approved for a card. If this is the case, you can start by trying to get a student card at your bank, or start with a department-store or gas card (which Kiplinger says are easier to get).
You can search cards by interest rate or other qualifiers at a site like http://www.bankrate.com/ or http://www.creditcards.com/, but remember to look for the information instead of getting distracted by the ads. (Bankrate also has some great articles on credit card basics!)
Using a Card
- Only spend what you have in real money. In other words, use your credit card like a debit card. Keep track of every penny you charge so you don’t end up being unable to afford your payment. It may seem obsessive, but it will help you learn to manage your credit.
- Pay on time, every month. Remember, late payments can lower your credit score AND cost you an arm and a leg in late fees, so do whatever it takes to make your payments on time. You can add it to your calendar, have Google Calendar send you a reminder, or set your card up to auto-debit your bank account.
- Pay off your entire balance every billing period. The problem with credit cards is that some people spend more than they can afford to pay off-which means getting slapped with late payments or accruing interest charges. If you followed step 1, you should have no problem paying off your balance, because you’ve spent only what you have to spend. Better yet, make a bank transfer to your card after every purchase so you really know where your bank account stands.
- Keep your receipts. One of the best ways to keep yourself safe from fraudsters is to check your receipts against your statement at the end of each month. If you decide to get rid of the receipts after comparing, be sure you shred any identifying information (like the last 4 digits of your card).
- Don’t go over your limit. This is kind of a “duh” statement, especially if you’ve followed the first three tips, but don’t spend more than your credit limit allows unless you want to get hit with an over-limit fee, or be embarrassed when your purchase transaction is declined!
Entry Filed under: budget & finances