Your First Credit Card

YOUR FIRST CREDIT CARD – WHAT TO GET AND HOW TO USE IT

Credit cards can be a great tool to manage your finances while building valuable credit history that will help you down the road for bigger purchases. They can help if you choose not to carry cash and can offer protection against fraud or have a problem with something you purchased.

Credit cards can also get you into too much debt, if you use the card to spend foolishly. If you’re looking for your first credit card and don’t know what to look for, the tips in this post will help you make an educated decision.

WHAT IS A CREDIT CARD?
You may have had a debit card while in high school or college. A credit card looks and acts a lot like a debit card. You swipe your card to make a purchase. With a debit card, the funds are withdrawn from your bank account right away.

When you use a credit card, however, it’s like taking out a short-term loan. By signing up for a credit card, you agree to pay back that loan. Most credit cards give you a grace period to pay off that purchase without interest.

If you pay less than what you owe or take longer to pay, you will have to pay interest on those purchases.

WHAT MAKES A GOOD CREDIT CARD?
There are many credit cards to choose from. You want a good credit card that helps you and not one that charges you high fees or has overly burdensome interest rates.

Here are some things to look for in your first credit card:
 

• No annual fee – some credit cards charge annual fees. They’re still good, but you may want to avoid them for your first card.
• Lower interest rates – you can expect to pay higher rates as a first-time card user, but you don’t want a card with a 25%+ interest rate.
• Lower credit limit – this is how much you can spend on the card. A good first card will offer a limit of $500 to $1,000; you don’t want much more than that unless you have regular job income.

Using the above criteria will help you find a good credit card that will be a helpful tool to building your finances.

HOW A CREDIT CARD IMPACTS YOUR CREDIT SCORE
Getting your first credit card helps you in one significant way – building your credit score. When you make on-time payments, and pay off your balance in full each month, it helps improve your score. Doing the opposite hurts your score.

A good credit score helps you in many ways from getting lower rates on personal loans to better mortgages when you’re ready to buy a house and more. Additionally, many people can get access to your credit score, such as:
 

• Banks and Credit Unions
• Creditors
• Insurance Companies
• Landlords
• Employers

When your credit score is at stake, it literally pays to be wise with your first credit card.

RESPONSIBLE CREDIT CARD TIPS
Don’t allow the seriousness of credit overwhelm you. Yes, poor usage of a credit card can hold you back financially. Thankfully, by following a few simple tips, you can master credit and build a solid financial foundation.

Some of those tips are:
 

• Only buy what you can afford. If you don’t know where the money will come from, don’t buy it.
• Pay your bill on time, every month
• Pay your bill in full each month, whenever you can
• Stay well below your limit. Getting too close to your limit or “maxing out” your credit card will hurt your credit score and tells your creditors you can’t manage your card responsibly.
• Plan for large purchases. If you know a large expense is coming up, save money for a few months so you can pay the bill in full when it comes due.

By following the above tips, you will be well on your way to establishing good credit.

Getting your first credit card is an exciting time. With a little work, you can use it to build the foundation for a solid financial future and make it part of your passionate pursuit of your dreams.

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