Getting your first credit card and managing it well can be the first step toward building a solid and secure financial future. Ensuring you pay your credit card dues on time can help build an excellent credit score. Or, it can pile up as debt that you may struggle to pay over the years. Hence, how you balance out your financials with your first credit card is very important.
Although credit cards are excellent sources for people to overcome immediate financial crunch, they do require careful financial management. Even the slightest amount of oversight can land you into severe financial debts. In this article, we will discuss ten tips for beginners using a credit card.
Ten essential tips on how to use a credit card for beginners
For beginners, it is essential to know some important tips that cover using and maintaining credit cards. While it can be tempting to max out the credit cards, you must learn not to. There are some more points like this. As you read, you will get an explanation of those unsaid rules of owning your first credit card.
Here are ten valuable tips that will help them wisely make the most out of their first credit card.
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Table of Contents
Tips On How To Use A Credit Card For Beginners
- Understand your billing cycle and time your purchases accordingly.
Every credit card has its billing cycle. You must know the dates of your billing cycle. Once you become aware of your billing cycle, you can fully utilize your interest-free period. For example, if you make purchases immediately after your credit card bill is generated, you can enjoy nearly 45 days interest-free. Some credit cards may offer you a more number of days. The only condition is that your outstanding amount should and must be nill.
- Make it a practice to pay before your due date.
When you make it a regularization to pay the credit card bill before the due date, you improve your credit profile with your bank. When that happens, you get increased benefits on your credit card from your credit card provider. You may also become eligible for personal and other forms of loans and an increased credit card limit.
- Understand the rewarding patterns
Some credit cards offer rewards and reward points for spending wisely. Some credit cards offer rewards on specific purchases, while others offer access to airport lounges. You can redeem these points based on the bank’s policies and make the most of them!
- Avoid withdrawing cash
There is no interest-free period for cash withdrawals on credit cards. Beginners may make the mistake of withdrawing cash using credit cards. However, credit cards levy heavy charges from the time or day of withdrawal.
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- Explore the option of auto-debit
Try the auto-debit from account option. But remember that the interest on late credit card fee payments is exceptionally high. To avoid this charge, select the auto-payment option from your mobile app or net banking. When you do that, you allow the banker to automatically withdraw the credit card bill amount. In this way, you need not necessarily keep tabs on due dates.
- Try EMI
If for some reason, you cannot pay your credit card bill in full, you can ask the credit card to convert your entire bill into EMIs. When your total bill is converted into EMIs, it is broken down into instalments with some interest charged. This way, you can reduce the burden on yourself as you will only have to pay a part of the total credit card bill. Talk to your banker to know more about this.
- Download the mobile application
The mobile application is handy, and you can use it on the go. You can keep up with your credit card account quite easily. You can log in to view your balance anytime and also check your available credit limit. Although you can do all of this from the browser, the mobile app is always quicker and easier to use.
- Make it a practice to check your credit card statement
Every month, your credit card issuer will provide you with a statement detailing all the transactions you made from the last or previous billing cycle. Developing a habit of reading your credit card statement is essential. Sometimes, there may be errors, and you can spot them only if you make it a point to read your statement every time it is generated.
In case there are errors that you can spot, report them to your credit card issuer immediately. Although the rectification from your credit card’s issuer may take a while, it will reflect in the next statement.
- Use very little of your credit limit
It may be tempting to max out your credit card limit initially, but you mustn’t do it. How much of your credit you use, in other words, the credit utilization is one of the most significant contributors to your credit score. If you carry a large credit card balance for months, you can harm your overall credit score. It can also lead you into credit card debts that are a burden when it comes to paying them off.
- Set up a realistic budget
A credit card is a convenient way to make purchases and avoid minute financial crunches. You also earn exclusive rewards and points. However, ensure you avoid buying things you otherwise cannot. Having an understanding of the amount that you can spend and afford to pay back at the end of the month is crucial. If you lack this knowledge, you may run into heavy debts that can financially burden you a lot.
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What Are 5 Important Rules About Using A Credit Card ?
If with your first credit card, you understand how you must utilize it, you will go a long way, and credit cards will be a convenient tool for you. However, if you lack any of these ‘must-know’ rules of a credit card, you may land severe financial debt.
Having said that, credit card-related debt horror stories are widespread. Since you are a first-time credit-card user, here are 5 golden rules that will take you through the understanding of utilizing your first credit card.
1.Not finance purchases using your credit card.
Several credit card issuers offer ‘instant loan’ and other similar offers that may be tempting. You may also want to finance large purchases and convert them into EMIs. However, these are certain things that you must be avoided at all costs. These instant loans can be costlier than personal loans and severely derail your financial front. The point here is to understand that it is worth it to buy something small and then break it into EMIs of 6 months or less (at zero-cost EMI).
2.Always remember that credit is not cash!
Many people misunderstand credit limits as money in the bank. They mistake a 6 lakh credit limit for Rs. 6 lakh cash in the bank. However, that isn’t the case. Learn to spend wisely using your credit card. Spend only how much you can afford to pay off by your next billing cycle. If that seems impossible, then it is better that you start learning how to save.
3.Use no more than three cards!
Rather than having just one credit card and maximizing purchases, have two or three (at the most) cards. One could be the Visa, one the American Express, and the third one could be Mastercard. Plan your purchases across these cards wisely. In this way, you will minimize the per card utilization and build a solid credit score because you will have an increased number of loan accounts.
4.Never close any of your credit cards.
Avoid closing credit cards. All the credit cards that you own help in building a credit score. You hamper your available credit limit and utilization if you close any of them.
5.Don’t spend on your card to earn rewards.
Credit card rewards can be exciting. Complimentary lounge access, and offers on fuel and airlines, can always be tempting. However, you must realize that you must make multiple purchases to avail of the points and redeem them. So, avoid getting into these traps.
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How Do I Use A Credit Card For the First Time ?
Lastly, let’s quickly go through some important points that every newbie credit card user must keep in mind.
- Understand the basics of your credit card
- Pay on time
- Try to pay the balance in full each time
- Keep your spending habits in check
- Read your credit card statement regularly
- Know your credit score
- Review your credit card charges now and then
- Choose your cards carefully
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Final Words !
A credit card is an excellent way to build and maintain your credit score or cibil score. But you must also understand that it is crucial to use it judiciously. Once you have learnt to use it judiciously, it can become your best friend and guide you towards a better financial future. Hence, adopt the points as mentioned above from when you get your first credit card.
