Getting that first credit card in the mail is a financial rite of passage, but it is also fraught with potential peril. When used appropriately, that slim piece of plastic is a powerful tool for beefing up your credit score, making adult activities like getting a car loan or qualifying for a mortgage easier. But when used irresponsibly, that innocent looking card could be the start of a terrifying financial spiral, with crippling levels of debt and possibly even bankruptcy.
So how do you get your credit card experience off to a good start? How can you enjoy the many benefits of credit card use without falling prey to high interest rates, late fees and other charges? Here are some smart tips for protecting yourself and your finances when using a credit card for the first time.
Keep a Running Tally of Your Purchases
When you pay with cash, you know exactly how much you are spending, and an empty wallet is a clear signal that your spending spree is over. But using a credit card is different; when all you need to do is sign your name, it is easy to lose track of how much you are really spending.
It is always a good idea to track your spending, but it is even more critical if this is your first credit card. It can take awhile to go down the learning curve, and you do not want to learn from your mistakes.
Set Payment Reminders on Your Smartphone
Missing even a single payment could devastate your burgeoning credit score, and you should do everything you can to avoid this unhappy scenario. Once you have your new credit card in hand, take a minute to review the terms, including the payment due date.
Armed with that information, you can set a payment reminder on your smartphone, helping you avoid the high late payment fees and interest charges the credit card industry is known for. The reminder will also allow you to pay your bill right away, giving you one less thing to worry about.
Use Paperless Statements to Speed Those Payments
When you sign up for online access to your new credit card account, you will be given the opportunity to sign up for paperless statements as well. You should take the credit card issuer up on their offer, as paperless statements will speed your payments and help you avoid crippling late charges.
Paperless statements will also help you get advance notice of required payments, helping you avoid late payment fees and other nuisance charges. Once you sign up for paperless statements, you will receive a notification email when your monthly statement is ready to view.
Pay Your Bill on Time or Early if Possible
Last but certainly not least, the most important tip of all:Always pay your credit card bill on time. Making your payments on time will help you boost your credit score, making it easier to qualify for loans or a home mortgage.
Just as importantly, those on-time payments will help you avoid late payments and other charges, so you can enjoy the flexibility or credit card use without the dangerous downside. By tracking your spending throughout the month, you can make sure you can pay the entire balance; if not, it is time to take a break from the credit cards and switch to cash instead.
Your first credit card is a powerful tool, and like any tool it can easily be misused. Now that your card is in your wallet, following the simple tips listed above will help you make the most of it.