Your first credit card can be both a beautiful and dangerous thing. While it can certainly provide you with the security blanket you need for major life events like your first car, college, graduation, or your first job, it can also lead you down a very dark road into debt if you aren’t careful.
No matter what the reason is for your first credit card, you simply can’t allow yourself to get carried away with the façade of this newfound financial freedom. In reality, even the simplest of overextensions can lead to additional charges, which ultimately leads to even more debt.
Remember, not only do the balances that you accrue remain on your bill until they are paid in full, they also continue to grow due to the act of just keeping that balance; this is called interest, and it can cause incredible financial hardships. Therefore, you should approach your first credit card with cautious excitement; know that you are protected, but continue to respect needs vs. wants and know your limits.
Heed the advice of the experts and follow these three simple tips that can truly assist you in being successful with your first card.
- Know Your Interest Rates and Annual/Service Fees!– Most people foolishly ignore “the fine print” when it comes to applying for and eventually opening a credit card account. Well unfortunately for them, that’s where the subsequent fees and financial pitfalls can almost always be found. Be wary of a card that claims no interest, only to see the rate is ridiculous after a certain trial period ends. The same can be said for cards that state that they have no service or annual fee; you can bet anything that while you may get even the whole first year free of charges, that second year can bring upwards of several hundred dollars in annual fees just for having the card in your wallet. Remember, plan big purchases during those initial enrollment time periods where additional expenses are either waved or very low. Always weigh the pros and cons of annual fees for credit cards; the rewards that some companies offer can absolutely justify these charges, but that isn’t always the case.
- Make Sure You Are Getting the Right Rewards– One of the most underutilized functions of credit cards are the eventual rewards that smart spending can bring. Other cards can offer a slew of benefits ranging from cool gadgets and household items, all the way up to first class travel to amazing destinations. If you know you are going to be making consistent big purchases, for example with traveling to the city for your first job, make sure you purchase that train or ferry each month on a card that can let you reap serious benefits for your expenses. You aren’t going out of your way for these rewards; it’s really just a nice perk that comes along with being responsible with your card.
- Start Off With A Small Credit Limit– We saved the most important tip for last. Let’s face it, sometimes you just have to start things off slowly until you fully understand the ins and outs of a new process in your life; getting a credit card is no different, especially because any lapse in proper usage can lead to such staunch financial repercussions. Save yourself from serious growing pains by starting off with a low credit balance of a thousand dollars or less. This will grant you serious freedom in case you need to make a big purchase, but it will also hold you in check by hard capping the limit that you can overdo it. College years especially can lead to many a night out on the town wielding the plastic with no regard; setting a limit will ensure you things don’t get out of hand. No need to have more than student loans to pay for once you graduate.