You can build a strong financial future and create an excellent credit score if you know how to manage your first credit card or lead to mountains of debt you have struggled to repay for years. Here are some tips to guide you along the right path before you use your first credit card. Many students will leave for college to move towards independence. This blog is all about how to manage your very first credit card.
Managing their finances will be one of their new responsibilities. Unprepared for this new freedom students can quickly become indebted and damage their credit score considerably. Many college students are faced with the first time they get and handle a credit card account. :
1. Establishing a budget
A credit card is a convenient way of buying and earning rewards, but not to buy things that you cannot afford. You will be prevented from getting in at the end of the month with a realistic picture of the amount you can spend and pay off.
Trying to use a budget like the 50/30/20 way, which suggests that 50% of the household payment is spent on needs like housing or food, 30% or less on things you want but don’t need, and 20% or more on savings and debt payment. This ensures that your credit card expenditure is consistent with your revenue and other saving and spending priorities.
2. Follow up on your purchases
The first step is to calculate the amount that you can afford to spend. Then be careful to follow up your buys all months, with the help of the mobile application or website of your credit card. Once the monthly expense limit has been met, you must avoid using the card until the balance is paid off. This discipline will help you to build a good loan score and prevent you from having debt on your card.
3. Automatic payment settings
Every month it may take time to pay a bill. By scheduling automatic payments prior to your due date, protect you against late credit card bills. Make sure the scheduled payment for your full balance is better than the minimum payment, and before payment is scheduled you have enough money on your check account. If not, a late fee or returned payment fee can be charged.
Payment on time is also important because your credit score, the 3-digit number lent by lenders, contributes greatly to your payment history. In order to keep your score strong, try to pay every one credit card bill on time.
4. Use as small as possible your credit limit
It can be tempting to upgrade your credit card to the maximum, but it is crucial not to charge it up to your credit limit. The second biggest contributor to your credit score is the use of credit, or how much of a credit limit you use. You can damage your score by running a large credit card balance and taking it month by month. It can also lay the basis for credit card debt, which can take a long time to repay.
Use your credit card to buy items that you have budgeted for and pay full balance well before the date of expiration is very important. If you cannot fully pay your balance, prepare for your purchase a fair repayment plan. You should probably not charge your credit card expenses if you are unable to pay the balance in the foreseeable future.
5. Pay your bill every month in full
Only you have to pay the minimum amount that is a percentage of the balance you have remained with your credit card issuer. Although it could sound much easier and less costly than you have to pay the full amount, it costs you money over time.
The minimum payment adds interest every month to your balance until you finally pay full. Your balance will decrease each month by only a small amount since a part of your payment is used for the accumulated interest. The end result? To avoid interest payments, pay your balance to the full in every month.
Since students with limited credit history, the student card interest rate is usually higher than that of a highly credited person. In the mid-200’s, interest rates can be. Thus you pay enormous interest on purchases if you carry a balance each month. You will also be able to pay off all your balance each month, keeping your payment history low. All this is going to help you gain credit.
6. Regularly check your statement
Every month your issuer of credit cards will send you a statement detailing your previous billing cycle transactions. It is important to read your billing statement even if you have your monthly payment scheduled. You should check for errors or unauthorised charges in your statement.
If you find any, report them immediately to your issuer of your credit card for clearance. You can check your transactions in real-time and spot errors much more quickly when creating an online account or downloading the mobile app for your card. You can even set up alerts to help you immediately find suspicious activity.
7. Rewards Redemption
Make sure you understand your premiums programme if you have chosen a credit card as your first credit card. Maximise your cash back or points by spending in the most rewarding categories, like restaurants and gas.
So don’t let the dust collect your rewards. You can pay for a debit credit, your bank account check, travel, hotel, gift card, etc depending on your credit card. Some rewards are dated to expiry, so you must use or lose them. For expiry policy, check your card’s fine print.
8. Use the additional benefits
In addition to cash back or travel benefits, many credit cards offer other benefits. Location insurance; waived baggage insurance; travel insurance; reimbursement of the price, when the price of an item drops after the item has been purchased; and an extended guarantee are just some of the fees offered by many credit cards. If you have any questions about your credit card’s benefits, log in to your online account to review your card agreement or to call your customer service.
9. Know how and how to avoid your fees
You can avoid most credit card dues by forgetting behaviour, except for a yearly fee. For example, in order to avoid a late charge, you can make your payment on time. Skip the cash advance to avoid a payment in cash. Avoid foreign transaction charges for foreign purchases by selecting a card not charged.
You will see that your new credit card can bear several expensive charges, including over-the-counter and cash advance charges when you read your credit card conditions. With proper cash management, these charges are easy to avoid. Control your expenditure on a credit card so that your limit is not exceeded. Do not get cash progress unless the emergency is absolute. Cash advances, in addition to fees, often carry an APR that is higher than the standard APR, making the borrowing money expensive.
10. Mobile application Download
With the mobile app of your credit card, you can keep your credit card accounts on track. You can log in for your balance at all times, check the credit available for your payment, post your credit card lost or stolen, etc. You could do much of this from your browser on your phone, but often apps are designed to use mobile devices faster and easier.
So, This blog was all about how to manage your first credit card and we think you should’ve got to know something new about the working of credit card.
Also read our Blogs related to Credit Cards below.
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