Unfortunately, we do not all start out with immaculate and perfect credit histories attached to our names. We must start the process as everyone else does and build that credit over time through a number of different methods.
But knowing where and how to start as a first-time credit card user can be very daunting, confusing, and leave you wondering if you are doing the right thing. But there are a few key things to keep in mind when you open your first credit card account that can have you going down the right path to good credit sooner rather than later.
Remember: It’s Not Free Money
One of the biggest issues that credit card users have is that they think of a credit card as “free money”. It most definitely is not that. Every time you charge, it is basically a loan. You have a line of credit that is set by the issuer before they issue you the card. So if you have been given a limit of $1,000, you can charge up to that amount.
But there are interest rates attached to that. So if you max out your card and you can’t pay it off soon, you will be paying additional interest fees on top of that principal. Charging things that you don’t need is a quick way to debt and you don’t want to retain any unnecessary debt as it can hamper your credit score long term.
It’s Okay to Put Things on Your Credit Card
For a responsible credit card user, the card can and will get used but only for the right things. It’s there for emergencies but you should also make a habit of using it to pay recurring bills. This way, it is an expense that you had planned for already and you can pay it off after you’ve charged it. This helps to establish a positive payment history, which in turn bolsters your overall credit score.
Being responsible with you card can do great things for your credit, which in turn helps you get better deals when making a larger financial purchase, such as a car or mortgage.
These are the two biggest tips for new users of credit cards. It’s all about establishing a consistent good payment rate and about not creating too much debt for yourself. Follow these tips and your credit will grow stronger and stronger in no time.