Millennial Mistakes: Credit Card Mistakes To Avoid For a New Financial Generation
Getting a new credit card can be exciting. It feels like you’re holding unlimited spending potential in your hand. Suddenly, you can make big purchases you couldn’t before. Plus, you get all those cool rewards and points.
Don’t get too carried away though. While credit cards can be convenient and be useful for building your credit score, they can also land you in serious financial trouble. Make sure you know what you’re getting into before you before you start using credit cards. Follow these tips to help you take full advantage of the perks of credit cards and avoid ending up in over your head.
Examine Your Spending
Before you get a credit card, check out your spending patterns and your budget. If you have regular expenses that you normally use cash on, you could use a credit card on them instead without too much risk. If you can’t find a good use for a card in your budget, though, it might be smarter to wait and get a debit card instead.
Start With Just One Card
Since different credit cards offer rewards on different purchases, it can seem like a good idea to get a bunch of them. If you’re just starting out, though, it’s probably best to get just one. One credit card will be much easier to manage, and you’ll still be able to build your credit score.
Do Your Research
There are a ton of different cards out there, and it can be confusing to try to figure out which one is best for you. It’s worth putting in the effort though. Make sure you look into fees, interest rates, rewards and where you can use a card. Get as much information as you can before making a decision. Online resources like http://best.creditcard can help.
Pay in Full
You don’t need to carry a balance from month to month in order to build your credit score, despite what many believe. Doing this can actually end up costing you money as interest builds up. For new cardholders, interest rates are often higher, which means it’s especially beneficial for newcomers to the credit game to pay off their balances in full.
Take Due Dates Seriously
With some bills, missing a due date isn’t too big a deal. When it comes to credit cards, however, it can be quite costly. If you miss a due date, you could end up with late fees, a higher interest rate and a lower credit score. Put a reminder on your calendar or phone to remind you when payments are due and take due dates seriously.
Don’t Max Out
It can be tempting to make a big purchase you’ve had your eye on for a while when you get a credit card. Resist the temptation. When you max out your credit card, creditors see you as a higher risk of defaulting. This will negatively affect your credit score. It’s often recommended that you keep your debt-to-credit ratio below 30%, which means you may have to wait to make that big purchase.
Credit cards can provide a lot of benefits both in the short and long-term, but they also come with risks. Following these tips can help keep you out of trouble and enable you to enjoy the perks of using a credit card.