Credit cards are a powerful financial tool. If you use them wisely, they will help you achieve your financial goals. But as the saying goes, with great power comes great responsibility. Abuse them and you will find yourself in a world of financial hurt.
If you recently got your first credit card, here are nine tips to help you use it in a smart, financially-sound way:
1. Read the Fine Print
Eye-catching promotional headlines can be very appealing. But look at the details. You’ll especially want to watch for things like high annual or late fees, or additional costs attached to using the card.
2. Shop Around
Credit card companies are very competitive. That means you’ll probably have a few offers from which to choose. Make sure you compare cards rather than just applying for the first one you see. Pro tip: choose one with a lower Annual Percentage Rate (APR).
3. Pay the Balance in Full Every Month
Make sure you pay off your purchases at the end of every billing cycle. This way, you’ll avoid paying interest, which, if allowed to build, can dramatically increase the total cost of your debt.
4. Use It to Build Your Credit
Remember when we said credit cards are a powerful tool? When you pay off your balances every month, you establish a positive credit history. You demonstrate to credit agencies that you can handle the responsibility of credit. This will become important when you want to buy a car, rent an apartment or even apply for a job.
5. Treat It Like Cash
If you don’t have the money now (or in the near future) to pay off the purchase, don’t put it on your card. You increase your risk of accruing interest and expanding what you owe (that’s how people get into debt).
6. Consider Becoming an Authorized User First
Not comfortable with having your own card yet? See if your parents will let you become an Authorized User on their card. You’ll be able to make purchases without being the primary cardholder.
7. Look for a Good Rewards Program (But Not at the Expense of a High Rate)
Cards for first-time users without much of a credit history may not have exceptional rewards, but it can’t hurt to look. You might be able to find decent cash-back or mileage offers.
8. Don’t Share It with Anyone
Credit cards are private. Don’t let anyone use it under any circumstances, even if it’s a good friend who needs to borrow money.
9. Always Check Your Statements
Unfortunately, credit card fraud is a very real thing. Check your statements every month to make sure there aren’t any unrecognizable charges. If you see a purchase that you didn’t make, report it to the credit card company right away.