Are you excited to get a new credit card or planning to get your first one? If you haven’t one yet and are thinking about applying, then read this guide first to learn the things to watch out for before grabbing your very first plastic.
Only Charge What You Can Afford to Pay in Cash
The most common problem with holding a credit card is that we are given access to purchase things, even if in reality, we cannot afford them. Treat your card as you would your own cash. Only charge things that you have the money to pay for, and avoid
Do Not Carry Balances
If you’re used to constantly having balances on your cards, this could pull your credit score down. In addition, the interest charges on these balances can be very expensive in the long run. Avoid paying the minimum amount only, because it doesn’t get rid of the debt, but rather, it sinks you deeper into bad debt.
Do Not Miss Your Due Dates
Perhaps the most important factor that determines your credit score is your payment history. Whenever you’re applying for a new card, new loan, mobile contract and other utilities, and even when looking for a place to live, your provider will check your payment behaviour in the past, and most likely decline you if they see that you keep on missing your due dates.
Avoid Too Much Applications
Too much credit card applications may not only lower your credit score, but it could make managing your debt extremely difficult. Apply only for new credit when you’ve gained enough experience, and if your credit’s in good shape.
Do Not Close Your Oldest Credit Card
Maybe you’re working on your budget and avoiding debt, or perhaps got a new plastic card with better features and rates. Whatever the case may be, do not close your oldest credit card just yet, especially when you’re on the process of rebuilding your credit. You can keep a card and stay out of bad debt with proper discipline. Keep in mind that the worse your credit rating becomes, the more difficult it will be to manage your finances.
Compare Rates and Features
When you’re shopping around for a card, keep in mind what you need. Perhaps you buy gas frequently, or travel often because of your job. You can look for a miles card, cashback, and any other type of card. While the interest rates and annual fees should also be taken in consideration, you won’t benefit from a low interest card if you’re not carrying balances.
Do Not Max Out Your Credit Limit
One of the factors that contribute to your credit score is the credit utilisation, which is actually the way you use up the credit limit assigned to you. As a rule of thumb, you can use up to 70% of your credit limit to keep your credit healthy. You’ll also realise the benefits of not maxing out your card during cash emergencies.
Never Make a Cash Advance
Cash advances is almost the same as charging things that you can’t afford to pay off in cash, only that this is worse. When you make a cash advance, the interest rates are higher, not to mention that no grace period is given. Let’s say you paid off the cash advance the next day, the interest rate charged couldn’t be reduced.
Avoid Letting Anyone Use Your Card
We all have those friends and relatives who constantly ask our help for their purchases by borrowing our credit card. While small, infrequent transactions here and there may not be harmful enough, regular big purchases may put you in trouble if your friend defaults. Not to mention the tension that it could put on your relationship.
Following all these tips can help make sure that your credit card journey will be one that is smooth and fruitful.