Having a credit card is the best way to make purchases without having cash in hand. It enables you to access funds from a predefined credit limit to cater to your financial requirements. The credit limit is decided by your issuing bank based on factors such as income and credit score.
As a first-time credit card user, it is crucial to use your credit card wisely to prevent late payment fees and hefty interest charges. We have prepared a list of top tips that you can follow to make the best use of your credit card.
- Choose your credit card
The first thing that you need to do before purchasing your first credit card is finding one that serves your needs and preferences. Do not give in to your excitement and make the mistake of buying the first credit card you see online. Take your time and assess your needs. Determine why you need a credit card.
Do you need a credit card to pay off your online shopping bills or to offer travel benefits? If you are a frequent traveler, it would be wise to get a credit card with features like travel insurance besides other benefits, such as purchase protection, zero liability, etc.
- Maintain a budget
When you use a credit card to make a purchase, you will have to pay the bill amount at the end of the month, on or before the due date. Failing to make on-time repayments will bring interest charges that can put a significant burden on your pocket.
You must use your credit card wisely. It would be wise to track your expenses and follow a strict budget for everything. Sticking to your budget allows you to avoid going overboard with your credit card.
- Make sure to pay your credit card bills on time and in full
As a first credit card user, you have to keep in mind that skipping your credit card payments can have grave repercussions on your credit score. There is a popular belief among youngsters that they can always pay the minimum amount and the balance some other time.
But, what you do not know is that if your payment is delayed, you will have to incur late fees. So, it is advisable to pay your credit card bills on time and in full to make the best use of it.
- Do not take credit limit increase for granted
When you pay your credit card bill on time, your credit card issuer will increase your credit card limit. Having an increased credit limit allows you to spend more money. However, it does not mean that you should spend more money without needing to. Since your repayment capacity remains the same, the chances of defaulting on paying your bills are more.
- Avoid withdrawing cash from ATMs
Although you can withdraw cash from ATMs using your credit card, it is advisable to not opt for it, unless it is necessary. You must understand that credit card companies charge higher interest on cash withdrawals. Besides, you will also have to incur ATM withdrawal charges.
So, using your credit card to withdraw cash can cost you a lot in interest charges and withdrawal fees. You can always use your debit card to avoid such expenses.
- Do not share your credit details
It is something that every bank will advise you from a security perspective. Sharing your credit card details can put your financial health in a compromising position. An authorized transaction may happen through your credit card, and you might become a victim of credit card fraud. Furthermore, it is your responsibility to use a secure website while making online payments with your credit card. So, keep your credit card details to yourself and never share them with anyone, not even to anyone identifying himself as the bank representative.
- Keep track of your credit score
Using your credit card to make purchases has a direct impact on your credit score. It can have both positive and negative affect on your score. For instance, if you pay your credit card bills on time and in full, your credit score will increase and vice versa.
Users who get their first credit card online tend to apply for multiple card memberships at once. But, only a few realize that it can negatively affect the credit score. A low credit score portrays you as a risky borrower, making it difficult to secure loans in the future.