You’ve probably been waiting for this moment for a long time. No more begging the parents for just another hundred dollars. No more scrimping and saving on a meagre college budget. You have, to put it succinctly, Arrived. That feeling of satisfaction when you get your first shiny new credit card and use it to buy a great pair of shoes is really something. This article is really about how to preserve that satisfaction a credit card can give you. You control the card, but the card should never control you.
Before you use a credit card, understand how it works.
A credit card is essentially symbolizes an agreement between your lender and you. The lender decides to give you a certain amount of money to spend. You promise to repay it at fixed intervals along with certain fees. The fees usually include service and account fees, as well as interest on balance carried over past the grace period. Which basically means you’ll have to pay interest if you delay making your payments to the lender. If you pay the balance in full, and on time, it’s probable you won’t have to pay any interest at all.
You have a credit score now. Keep it high.
Because your credit score is something that will affect your financial situation for the rest of your life. Here’s how it works. When you use your credit card, the credit card company will report your financial activity to a credit bureau. The bureau in turn will compile the information received into a credit score. A credit score is a number that shows how well you manage your money. If you have a high score, you will find it easier to obtain loans such as mortgages. The amount you’re able to borrow from a bank will also be higher. A good credit score tells your bank that you manage your money well. And that you can be trusted. To
By the way, here’s how you can keep it high.
Pay your bills on time. All your bills, from utility to phone. If you have debts, pay them off as soon as possible – or at least regularly. And try to avoid having a balance on your credit card. Another handy trick (that you’ll probably need for the future) is leaving existing credit cards open, even if you don’t use them. (Unless, of course, you’re being charged a high annual fee.) Owing the same amount but having fewer accounts could lower your credit score. On the other hand, don’t open accounts if you don’t need them. It rarely ends well. Unnecessary credit is an easy way to overspend and end up in debt.
Most credit card accounts are revolving credit accounts. Revolving credit automatically renews after you pay off part or all of your existing debt. Unlike auto loans, for instance, they don’t have a fixed term and the payments you need to make change according to your existing balance.
Interest rates, fees and other pains-in-the-neck.
According to law, credit card companies must disclose all interest rates and fees to you. They basically add up to the cost of a credit card. As mentioned before, you can usually avoid interest rate charges by paying your balance in full during a grace period. To avoid them becoming a pain in the first place, it’s important that you make payments on time – delayed payments are always more expensive in the long run. Keep in mind that the advertisements you see for low interest rates are always the best offer the bank can provide, an offer not everyone is eligible for.
Reap the right rewards.
Most credit card companies offer a reward for using their credit cards. They could be cashback, points that add up to free purchases, or discounts on specific expenses. Make sure your rewards will be beneficial to you. For example, if you’re not a frequent traveller, you won’t need travel rewards points.
Monitoring your credit.
Your credit card company will send you statements every month that detail all your financial transactions. It’s important to go through them – if you find charges that shouldn’t be there, report the problem to your credit card company immediately. The company is legally obliged to correct any discrepancies. Credit bureaus offer a free copy of their credit reports each year. Request yours, and make sure there are no errors. Don’t forget that your credit score is determined by these reports.