Owning a credit card is a big responsibility – many people who have never owned a credit card before do not understand the power that such a tool can have in the right or wrong circumstances. With the credit market returning to normal after years of low availability, millions of people are now receiving new offers for first-time credit but are not sure which offers are best for them. Others have already received their first credit cards in the mail but are weary of their usage. If you are considering your very first credit card, then it is important to exercise good judgment. In the following article, we will discuss several tips by which first-time credit card owner should abide.
Know the Purpose
Why exactly do you need a credit card? Do you want to build your credit score for future plans, or do you need an emergency line of credit for when the worst occurs? Will you be paying your bills in full each month or do you intend on keeping a balance from time to time? Before you make any decisions, you will need to know the answers to these questions as well as the overall role in will play in your finances. Depending on whether or not you carry a balance, you will want to consider the interest rates of each potential card in order to ensure that additional charges remain as low as possible.
Read Your Details
Whenever someone first applies for a credit card, it is imperative that he or she read the fine print associated with the card in question. While the CARD Act of 2009 made it more difficult to credit card companies to squeeze in certain terms and conditions without obvious repercussions, the reality is that most credit cards still have fine print and clauses that can be troubling if you fall into certain situations. Does your potential credit card’s interest rate double if you make a late payment? What about cash advances and stipulations on that great-sounding rewards program? A credit card is a huge responsibility – take the time to read the terms and conditions before you apply for one.
It’s Not (Your) Money
Study after study has shown that a large percentage of credit card owners spend more than they would if they did not possess credit cards. The psychological notion that a credit card is not “real money” can lead to disastrous consequences if the behavior is not rectified. Every dime that you spend on a credit card can be subject to interest charges – whenever you make a purchase, consider whether or not it is worth 20% more, as this is a good ball-park average for the premium that the average credit card owner with debt pays for everyday items purchased with a credit card.