Using the credit card for the first time is exciting because it means you can begin to build your credit. Also, you will start accessing the perks associated with having an established credit history: lower interest rates, easy credit checks and the ability to apply for loans.
Though first-time credit card users are motivated to build their credit, if they are not deliberate with their credit card use, they might find land in debt and with a lower credit score than ever before.
Here are 9 tips to handle first-time credit card users.
1. Select Your Card Wisely
Shopping around for a credit card? Consider it important to choose your credit card wisely. There are three main factors you’ll want to consider:
Interest rates fees (annual fees, late fees, foreign transaction fees, and more), rewards and benefits.
Depending on how you want to use your card, one factor may be more crucial than the rest. For instance, if you plan to pay off your balance in full each month, you may not be worried about the interest rate.
But regardless of how you plan to use your credit card, it’s always a good idea to shop around and understand the terms and conditions of your credit card.
2. Spend What You Can Afford
It may seem obvious, but some first-time credit card users tend to max out their credit card.
It’s alluring to use your credit card to cover bills or to make ends meet until you get your next paycheck, but spending more than you can afford is a recipe for disaster.
This can easily result in a vicious cycle of minimum payments, high-interest fees, and stress. To keep things simple, only charge what you can afford to pay for.
Of course, emergencies transpire – a sick pet, unexpected home repairs, or sudden job loss. But even then, it makes more sense to get a personal loan.
For regular expenses, it’s always better to ask yourself if you can afford the full purchase price. If that is NOT the case, then it’s perhaps best to walk away.
3. Pay The Full Balance Each Month
Talking of credit cards, the goal should be to always pay the full balance each month.
For instance, if you spent $300 using a credit card, then you would aim to pay $300 towards the card within 30 days. This ensures that you aren’t accruing any interest, which is pivotal because interest charges can add up quickly.
Further, paying the balance in full reflects positively on your credit score. Contrary to common misconceptions, it does not hit your credit score if you pay your balance in full each month.
4. Make At Least The Minimum Payment
If you cannot pay off your balance in full each month for any reason, it’s important that you at least make the minimum payment, which is calculated by the credit card provider and will appear on your account homepage.
If you fail to pay the minimum amount, there are some negative repercussions that may occur as a result. This includes your credit score plummeting, an increase in your interest rate and/or the credit card getting canceled.
5. Pay Extra When You Can
Here’s a great credit card tip for first-time users: pay extra when you can. If you can’t pay the entire balance, but you can pay more than the minimum, then make sure to do so.
Here’s how it goes – anything extra that you put towards your credit card balance will help you save money on interest and ensure that you can pay the balance faster.
If you’re curious about how much you can save by paying an extra $20 or $30 per month, try experimenting with the credit card repayment calculator.
For example, if you have a balance of $1,000 with 18% interest and a minimum payment of $30, you can save a total of $198.89 by paying an extra $20 each month.
6. Look At Your Statements For Errors
Errors can take place from time to time, it happens. But if you don’t want to end up paying for mistakes made by your credit card company or another business, it’s important to check your monthly statements.
There are a few minute things you’ll want to look for.
Double Charges – This occurs when companies accidentally book you twice for products or services.
Unauthorized Transactions – If you’ve disputed a wrongful charge and your credit card company is investigating it, you are not responsible for paying for the charge until the investigation is complete.
Fees – Always double check to make sure that any fees that appear on your statement are correct. If the fees aren’t correct or if you’re unsure why the fee is there, call your credit card issuer to get more information.
7. Secure Your Information
Always keep your credit card information safe.
Don’t ever divulge your credit card information to strangers on the Internet and make sure to check that websites are secure before entering your information.
Things to look for include a lock symbol in the upper right-hand corner of the page a web address (URL) that begins with “https” instead of “http”.
Taking a minute or two to verify that a site is secure can save you hours of frustration and could even avoid you from becoming a victim of fraud.
8. Check Your Credit Score
In the past few years, several Canadians have reported errors on their credit reports. Mistakes happen and that’s why it’s important to regularly check your credit score.
Requesting a copy of your report is simple and can be done by letter or phone with Equifax Canada or TransUnion Canada.
It’s a good idea to check your credit score once every year. It’s recommended to order a copy from one credit bureau and then wait six months and order a copy from the other credit bureau. This way you can keep an eye on things and catch errors faster.
9. Maintain Your Score High
There are a few factors that determine your credit score.
Length Of Credit History
The length of your credit history is discerned by when you first opened a credit card or signed for a loan. As a first-time credit user, it is a good idea to keep your credit card open for as long as possible.
As long as there isn’t an urgent reason to close it, keeping your first credit card account open will help improve the length of your credit history.
Credit use means making payments on time and keeping your account in good standing. It also refers to credit usage or the percentage of your available credit that you have used at any given time.
The rule of thumb is to use no more than 35% of your available credit. So, if you have a credit limit of $15,000, your balance shouldn’t exceed $5,250. Doing so will drop your overall credit score on Equifax and Transunion.
Different Credit Types
When it comes to different credit types, it’s a good idea to diversify your loan types. This may refer to signing up for a car loan.
Speaking of building your credit with a car loan, Canada Auto Experts is known for helping people with their credit regardless of their current credit scenario. Call 1-855-550-5565 to talk to a credit specialist and get approved for the fastest credit rebuilding process today!
- How you can benefit from our dealership connections
- Benefits of having an expert help you shop for a vehicle you can afford
- Avoid high interest rate and have an expert on your side
- How to negotiate the best deal on a car loan in Canada
- Tips for improving credit scores to qualify for better auto financing rates in Canada