Getting your first credit card is a big step into adulthood. Having one (and using it wisely, of course) opens you up to a lot of new opportunities. However, there’s a lot more that goes into it than just applying and swiping. Here are a few things you should know before you get your first credit card.
#1: There are credit cards for beginners.
If you want to get your first credit card, but are having trouble finding one that you can qualify for, don’t worry! There are many companies that offer cards for students and people who are just getting started on their credit. Check out our article on the best credit cards for students to see what’s out there.
#2: It is possible to avoid fees.
If you think you’ll have to pay some type of fees when you have a credit card, that’s not exactly true. There are a lot of cards out there that have an annual fee, but there are also a lot that don’t. And you’ll run into late fees if you don’t pay on time – but if you always pay on time, you won’t encounter this. Another possible type of fee is a foreign or international transaction fee, but this is easy to avoid, too. If you’re planning a trip out of the country, use another card that doesn’t charge these fees, or pay with cash. As long as you do a little research before applying and use your card wisely, you won’t be hit with fees.
#3. You don’t have to use your entire credit limit.
In fact, it’s recommended that you shouldn’t. Your credit limit is the total amount available to charge, and the credit card company will set it when you apply for a card. Even if you’re paying the balance off in full, getting close to your credit limit can actually hurt your credit. As a general rule, it’s best to keep your credit utilization (how much of your available credit you use) to 30% or under. (So, if your available credit limit is $500, try not to charge more than $150 per month.)
#4. Credit cards have a lot of safety precautions in place.
If you’re worried about the safety of having a credit card, most have strict precautions in place to protect your information. Virtually all companies have fraud monitoring in place, so if any transactions look suspicious, you’ll be notified immediately. And because purchases on your credit card aren’t linked directly to your bank account, many experts recommend making this your primary way to pay.
#5. You don’t have to only pay the minimum.
Each type you log into your credit card account, you’ll see a balance listed as the minimum payment due. But this isn’t showing you your total balance. This is only the base amount you need to pay each month, but doing so can hurt more than it helps. Paying only the minimum balance is really only paying the interest (and possibly fees) from the prior month. Not only are you not making a dent in your principal balance, but you’re only letting it grow, which can make it a lot harder to manage as time goes on.