Things to Know Before Getting Your First Credit Card

There are many upsides to having a credit card, such as building one’s credit score, making certain purchases, and even earning cashback points. With the right practices and money management habits, people can do quite well and set themselves up for financial success. However, without the proper knowledge, individuals who manage to obtain credit cards can wreak serious damage upon their financial standing and sink themselves into debt for years or decades to come. For these reasons and more, an awareness of the following facts, prior to getting one’s hands on a credit card, is absolutely paramount.

The Charges Must Be Paid Back

Most people are very young (18-22 years old) when they receive credit cards within their own names. While individuals in the foregoing age range are, in fact, adults, they may not necessarily have the knowledge of everything which comes along with credit card ownership. Virtually everyone has heard horror stories of someone swiping their card repeatedly and then being unable to pay the monthly bill. An inability to pay the bill when it comes due results in subsequent interest charges.

Interest is a hole which can take years, decades, or even a lifetime to climb out of. For this reason, starting off with a low credit limit (no more than $500) is usually best. However, regardless of the credit limit, people must be sure to pay back the money which they “borrowed.” It’s worth noting that certain credit card plans provide grace periods before charging interest on unpaid balances. Not all credit cards plan do this and, to be on the safe side, anyone who charges a credit card should be sure to make the appropriate payments before or when the bill comes due.

Building Good Credit Takes Time and Discipline

Merely having a credit card and paying off the balance will not immediately engender good credit. Time and consistency are considerable factors in the development of good credit; people who are truly serious must ongoingly pay off their charges and abstain from incurring any interest. Moreover, credit card users are advised not to spend more than 30% of their credit line. There are no penalties for surpassing the 30% threshold, but adhering to it truly helps one establish their credit and finances.

Credit Cards are Not For Everyone

Despite the upsides of credit card ownership, they are only applicable when people punctually pay off their balances and avoid debt. Individuals who struggle with money management skills or suffer from low income might do well to hold off on obtaining a credit card. Credit should only be used by people who know they can afford to pay back what they’ve charged. Credit cards are not free money; at some point, the bill always comes due.

 

Authored by Gabrielle Renee Seunagal

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