Credit cards can be useful financial tools, but they can also lure you into financial disaster. Too many young borrowers make mistakes that cost them dearly for years into the future. Apply the following tips to learn healthy credit card habits from the start.
Don’t Accept a Bad Deal
All credit card companies want to make profits, of course, but some do it in ways that seems tantamount to robbery. If you don’t have a credit history, you might be tempted to apply for credit cards all over the place — even if those cards come with outrageously high interest rates or annual fees. Apply only for cards you will actually use. Before you submit any applications, make sure you understand the card’s interest rate and whether it charges an annual fee. And don’t apply for a lot of cards. All of those applications go on your credit history as negative indicators, making it harder for you to borrow.
Don’t Overspend for the Sake of Getting Rewards
Rewards credit cards can provide you with cash back, fun gifts, and even vacations. However, you should never overspend just because you want to earn rewards. For example, if your monthly budget is $2,000, but have to spend $3,000 within a month to get a prize from your credit card, you’ll end up having to slowly chip away at that deficit — and pay interest on it. Your goal should be to pay the entire balance on your card each month. If you go into debt, make sure that it isn’t for frivolous reasons.
Check Your Credit Card Statements
Some stores don’t even require your signature for credit purchases if you spend under a certain amount, and how often do cashiers ask to see your ID? These practices are an open door for identity thieves. Learn about how to protect your sensitive credit card information.
No matter how diligent you are about safeguarding your credit card, however, it’s still possible that fraudulent charges will show up on your statements. Save your receipts and compare those receipts with your credit-card statement every month. Many credit and banking companies will monitor your card for suspicious charges, but don’t rely solely on their system.
If you have concerns about anything you see on your statement, contact the company immediately so they can put a freeze on your account.
Watch Out for Fees
Penalties for late payments are notoriously steep, so it is important that you pay your bill on time each month. You might even be able to set up automatic payments.
There are other credit-card fees you should watch out for, too. For example, there might be a charge if you want a card with a fancy design on it. There might also be fees for increases to your credit line, cash advances, balance transfers, foreign transactions, and going over your credit limit.
Don’t let the little piece of plastic in your wallet go from being a useful tool to a nuisance. Use your first credit card wisely, and you’ll set yourself up for a lifetime of good credit.