Carrying a credit card is a big responsibility. It only takes one slip up to harm your finances and bog you down for months or even years into the future. Fortunately, when you know what you should and shouldn’t be doing, it’s easier to stay the course and take advantage of the many benefits a credit card has to offer. Here are five simple credit card tips for beginners:
1. Pay off your balance every month
This one tip should guide every decision you make regarding your credit card. When you pay off your balance in full, you never have to worry about paying a finance charge. Furthermore, it teaches you to responsibly spend.
2. Track your spending
Since you’re paying with credit, not cash, it’s easy to overspend. But of course, when the end of your statement period arrives, you could be faced with a serious situation: a balance that you can’t afford to pay in full.
By tracking your spending, you reduce the likelihood of overspending. Protect yourself by using your credit card for things you need, not things that you want. For example, you need groceries but you want a new television.
3. Don’t miss a payment (or make a late payment)
There’s no shortage of reasons to keep this tip in mind. A missed payment could result in penalty interest rates, a late fee, and a red mark on your credit score.
Know your due date and set a reminder for yourself. You don’t want to miss a payment or even make a late payment.
4. Opt for a rewards card
If you’re going to use a credit card, it makes sense to get something in return. And that something generally comes in the form of reward points or cashback.
Before choosing a credit card, compare three to five offers that pique your interest. You’ll soon realize that rewards cards are typically preferred over other types.
5. Don’t max out your credit card
As a general rule of thumb, keep your balance 30% of your total credit limit. And as noted above, implement a plan for paying off your balance every month.
Maxing out your credit card can weigh on your finances, result in monthly interest charges (until you repay your balance), and negatively impact your credit score.
Final Thoughts
If you’re new to using a credit card — or if you’re in the process of searching for the right offer — these five tips can help.
There’s no denying the benefits of having access to a credit card, but don’t forget that things can go wrong in a hurry. Choose the right card, spend responsibly, and don’t be afraid to change your approach if you’re heading down the wrong path.
