Money Talks, So Should You

Q&A: What is some advice for a first-time credit card holder?

Mechel Glass
by Mechel Glass, Dimespring Contributor  (@CredAbility)

Most people get their first credit card soon after starting their first job or graduating from college. Some view this card as their ticket to buy furniture and decorate their first apartment while others may be tempted to splurge at restaurants and clubs.

But these are exactly the kinds of expenses that result in getting a young person in a financial hole that can take years to dig out. Instead, it’s important to understand the features of a new credit card and how to take advantage of its benefits.

Realize that this is an opportunity to begin building a solid credit history.

By making small purchases and paying off the full amount due each month, anyone can gradually improve their credit score. As you grow older, a good credit score will be invaluable when it’s time to buy something special, like a car or home.

Use your card to purchase gasoline or a small number of groceries and pay off the balance. By repeating this strategy month after month, your credit score will rise.

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Next, look for a credit card that offers rewards points. By using these types of credit cards, I’ve been able to build up points over the course of a year and purchase Christmas gifts and other entertainment items, saving a few hundred dollars each month.

A huge advantage for the first time credit card holder is that it enables you to pay for almost any emergency.

While I advocate paying off your balance each month, if you cannot do so, it is critical that you have enough credit left to cover the costs of towing, a new tire or repairs if your car breaks down. The credit limit on your first credit card will likely be $1,000 or less, so make certain to always have enough credit available to cover the costs of an emergency.

To recap: building a credit score, taking advantage of rewards points and having money for emergencies are the benefits of a credit card, so take advantage of these features. Now, let’s talk about the dangers and how to avoid them.

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Never fail to make your payment by the due date each month and, at the very least, pay the minimum amount due. If you don’t make a payment on time, late fees will be added and your credit score will be affected. And repeating this pattern of behavior will make buying a car or applying for new credit difficult down the road.

Make sure that the card is secure at all times. Do not give the card to friends to use at the movies or restaurants and only use it to pay for items on secure websites. A secure website has an address that begins with https:.

Finally, read your credit card statement each month to make certain that all charges are accurate. If you see a charge on your statement that you did not make, report it immediately to your credit card company.

 

Mechel Glass is vice president of community outreach for CredAbility. She is responsible for coordinating community outreach and financial education activities across the agency’s regions and developing new education programs for both classroom settings and online. Glass, a U.S. Army veteran, is also co-author of “The Veteran’s Money Book,” scheduled for publication in April 2014 by Career Press. The book can now be ordered on Amazon.com.