Best Practices for New Credit Card Users

Have you just started college or your first job? You might be getting credit card offers from various lenders. Opening your first credit card is an exciting time, but it can come with a few pitfalls if you’re not careful. Here are some of our best new credit card user tips, so your new line of credit is a benefit rather than a burden.

Do you need a credit card?

The first thing you should do is analyze your income and budget. Do you really need a credit card? Would you be able to fund your general expenses with only a debit card? If the answer to the last question is “no,” it’s worth looking into how you can increase your income or reduce your expenses.

Many people have “emergency” credit cards for life’s unexpected blows, whether that’s a costly car repair or a major traffic ticket. Unfortunately, it’s all too easy to start considering other expenses “emergencies,” like a new outfit for a friend’s wedding or concert tickets that you can’t otherwise afford. Even small purchases can quickly add up—and rack up interest.

The key to successfully using a credit card is to make your payments on time, keep the balance low and avoid fees and late charges. When you search for a credit card, you should look for offers that will allow you to do just that.

Finding the right credit card

When you decide to get a credit card, there are four main things you should look for: the interest rate, minimum payments, whether they charge any fees and when the payment comes due. All of these need to be clearly stated in the credit card offer, or you could find yourself racking up debt fast.

A card that asks for a $25 minimum payment might sound great, but if they charge 25 percent interest on your balance, it might not be the best choice. If you spent $1,000 last month but couldn’t pay more than the minimum payment, you’d rack up nearly $250 in interest. In short, every time you use a credit card, you take on debt. It gets harder and harder to repay that debt when you don’t manage your funds wisely.

Fees are another potential pitfall. Cash advances, late payments, balance transfers and spending over your limit can all incur fees—which increase the amount you’ll end up paying back.

Budgeting appropriately can help you reduce credit card dependence. However, not all credit cards are bad. Some offer promotions and rewards that can benefit you, like airline miles or cash back. As long as you spend wisely, and pay the full balance each month, it can be a great way to save money.

Following these new credit line best practices will help you manage your debt and credit score, budget your income and live a financially healthy life.

For more information about personal and business banking, including new credit card user tips, call or pay a visit to OUR Credit Union today.