Tips for first time credit card users

Getting your first credit card is always an exciting experience. It is just a small piece of plastic but it has the power to make your financial life convenient. Do you know that a credit card is a great tool that helps you build your credit score! If you use your card responsibly you will strengthen your credit profile and get an edge when you apply for loans in future. Mishandling credit on the other hand can have serious negative consequences.


While a credit card helps to manage your cash flows and offers great convenience in making your everyday purchases remember that it isn’t free money. You basically borrow money from the card company and you need to pay it back at the end of the month in order to avoid any interest payments. So you need to use it carefully to avoid falling into a debt trap. Here are certain basic pointers that you should keep in mind so that you use your card in the right way.


Create a budget- To take control of your finances you need to create a spending plan and stick to it. Decide on a monthly limit that fits your budget. Keep track of your expenses and do not get tempted to overspend just because credit is easily available. Buy only if you can afford it. You may not be required to pay the money upfront but you do need to pay it back within the due date.  Hence self-discipline and control is the first rule that you should abide by while using a credit card.


Pay off the balance each month- Paying just the minimum amount due will attract exorbitant interest on your remaining balance. It will crush your finances and soon you will find yourself engulfed in a debt trap. Therefore make it a point to clear your entire balance at the end of the month. This should not be a problem if you are spending within your budget.

Avoid cash advances– A cash advance is a very expensive proposition. You are charged a fee for cash advances. The interest rate charged is higher than on purchases, and it starts accruing immediately. Use this option only when it is absolutely necessary and never make it a habit.

Pay the bills on time- Follow the golden rule of paying your bills before the due date. It is best to set up automatic payments so that you never miss a deadline. A clean record of on time payments helps in building your credit score.  Missed or late payments on your credit report are seen with suspicion by the lenders.

Check your statement- Checking your monthly statement of all purchased items will help you to manage your finances well. Review your spending habits and look for opportunities to cut back. Watch out for signs of identity thefts and verify all expenses to catch any fraudulent transactions. Sign up for mobile alerts or email notifications every time the card is used.

Review your credit report- The way you handle your credit card has a direct impact on your credit profile. Review your credit report to see whether all the information reported by the card company relating to your payment patterns is correct.

Do not share your card information– Keep your card information, passwords and PIN private. Do not give out the account information to anyone including the bank officials. Be careful while using your credit card online. Verify that the site is secure before making any online purchases.

Keep the card active– Remember you need to use your card every month even if it is for small purchases and then pay off the balance before the due date in order to build your credit history. If you lock it up in the drawer it will not help you build a credit score.

Keep a check on the utilization ratio– Try not to use more than 30% of the available credit limit. Keeping balances low improves your utilization rate and increases your credit score.

A credit card can become your enemy if you do not use it wisely. Follow the above tips and let it be your comrade in your financial journey.