Want To Start Using A Credit Card? Here’s A Beginners Guide

If you just got yourself a credit card or have one but haven’t started to use it because you’re unsure of how to go about with it. Here are some tips to help you get started, as your first credit card can be a step toward building a solid financial future and establishing an excellent credit score. But, it can also lead to a mountain of debt you might struggle to repay for years. So here are some tips to guide you along the path.

  • Set a budget

Credit cards are a convenient way to get instant money, make purchases and earn rewards. But it would help if you didn’t use it to buy things you cannot afford. A realistic estimate of the amount you can spend and pay back at the end of the month will prevent you from getting into financial trouble.

You can try the 50/30/20 budget method, which suggests spending 50% of each paycheck on necessities like food and housing. Then, 30% or less on items you want but don’t need and 20% or more on saving and debt repayment. This could help you stay on top of your credit card spending, depending on your income and other spending and saving priorities.

  • Keep Track of Your Purchases

The first step in budgeting is determining how much you can spend. Following that, be diligent about keeping track of your purchases throughout the month, possibly with the help of the mobile app or the credit card website. Finally, once you’ve met your monthly spending limit, avoid using the card until you’ve paid off the balance. This discipline will help you establish a good credit score and prevent you from incurring debt from credit cards.

  • Set up automatic payments

Being used to paying your bills every month can take some time. By scheduling automatic payments for your credit cards ahead of time, you can avoid late credit card payments. Make sure you schedule a payment that is greater than the minimum payment (ideally, for the full invoice amount), and that you have enough funds in your checking account as well before the payment is due. Otherwise, you may be charged a late fee or a returned payment charge.

Paying on time is also essential because payment history is the most significant contributor to your credit score, the three-digit number that lenders use to evaluate your credit usage. So aim to pay every credit card bill on time to keep your score strong.

  • Use your credit limit as little as possible

Although it is tempting to use your credit card to the maximum- that is, up to your instant credit line– it is crucial to avoid this. Your credit utilization, or how much of your credit limit you are using, is the second most significant factor affecting your credit score. Therefore, accumulating a large balance on your credit card and carrying it from month to month can hurt your credit score. Also, it can set the stage for getting into debt from credit cards, which can take a very long time to pay off.

  • Pay your balance in full monthly

It is essential to understand that you are only required to make the minimum payment, a percentage of the outstanding balance. Although that may sound easier and less expensive than paying the total amount you owe, you will end up spending more money over the long run. So try paying your bill in full each month to avoid paying interest.