credit card advice
Congratulations! You’ve been approved for your first credit card, which is winding its ways to you through the U.S. Mail at this very moment. Oh, the fun you’ll have!
That is, if you use your card responsibly. Unfortunately, rookies sometimes commit fairly common mistakes with their first card.
But this story can have a happy ending — simply watch out for the following traps and you’ll be fine.
Once you carefully review these tips, check out our favorite credit cards of 2015.
1. Beware of “Hot” Cards
We’re not talking about stolen or counterfeit cards (although these can occasionally be a problem). No, we’re alluding to that new credit card burning a hole in your wallet or pocketbook.
It’s so hot that you have to constantly take it out and cool it off by using it. Overspending is the number one problem for new credit card owners. Part of the problem is the novelty and power of the card — you can buy stuff without cash!
Well, it’s not true — you just don’t need the cash at the time of purchase. That bill will come and you will have to pay it, with cash.
The Fix: Don’t use your card for unplanned purchases. Use a budget and plan credit card purchases the same way you budget cash.
2. Charge Me for These Three Jelly Beans, Please
New card owners have a tendency to charge everything, from a quart of milk to a 72-inch plasma screen TV. The problem is all of those little purchases add up real fast, and knowing you can pay for them with your card makes it easier to indulge yourself whenever you want.
That is, until you exceed you credit limit.
The Fix: If you have a petty cash budget, consider paying for it with cash or a debit card. It’s hard enough to resist buying that oversize candy bar when you see it — paying with cash may slow you down, helping your budget and your waistline.
3. The Road to Debt Is Paved With Minimum Payments
You go out, charge $1,000 and find your minimum payment is only $40. What a deal! All you can think about is the great stuff you can charge and pay hardly anything every month.
This is so wrong in so many ways. The first is interest — you are throwing away hundreds of dollars a year by making only minimum payments on large balances.
After all, you will eventually have to pay your balance, but it might take decades and thousands of dollars in interest to get your balance back down to zero.
The Fix: Always pay at least half of your balance, and preferably all of it, every month. If you can afford only the minimum balance, put the card in the vault and don’t take it out again until your balance is gone.
4. The Dog Ate My Calendar
There is no excuse for forgetting to make a credit card payment. If you use your computer to make payments, you might think it only takes a few keystrokes to pay your bill.
It’s true, but you still have to enter those keystrokes and do so on time. Missing payments can cause your interest rate to rise, your credit score to drop and cost you late fees.
The Fix: Use an automated personal finance program that lets you schedule payments in advance. C’mon, it’s not rocket surgery, you can do it!
5. When to Take a Cash Advance
Like, never! Well, sometimes an emergency occurs but not very often. You must pay a special (read “high”) cash advance interest rate and a fee. If you need regular cash advances, you are living beyond your means, which is a very bad idea.
The Fix: Cut your spending, simplify your lifestyle, move back home with your parents, but just say “no” to cash advances.