6 Things to Know if You’re New to Credit Cards

Photo: Creative Commons

1. Don’t Treat it Like Free Money — It’s Not.

Credit cards are super convenient. Especially if you’re in between paychecks and you feel like treating yourself to a pair of new shoes. But credit cards function like personal loans. Not only do you have to pay back the money you borrowed, but often times you have to pay it back with interest if you can’t pay in full by the due date.

2. Credit Cards are Flexible

As a banker, one of the main concerns I hear from first-time credit card users is, “what happens if I can’t pay off the entire balance by the due date? Will I get penalized?” The answer is no! As long as you are making at least the minimum payment before the due date, you will not be penalized for it. However as I’ve said earlier, you may accrue interest on your running balance if you’re unable to pay it all off at once. This is why it’s important to shop around for cards that have low interest rates. Some cards will even let you use your card interest free for the first year.

3. Find the Card That’s Right for You

All credit cards are different. Some have annual fees, some will give you rewards for simply using your card, and others allow you to use them internationally. Before applying for a credit card, it’s important to assess which kind of card best fits your lifestyle and ALWAYS read the fine print when fees are involved.

4. Don’t Max Out Your Card

It’s tempting when you first see the limit on your new credit card to spend as much of it as it allows you to — but don’t do it. Practices like these are bad for your credit score, and may affect your future ability to buy a car or house. Not only is this bad for your credit score, it drastically interferes with any kind of freedom you would’ve had with your card. If you’re ever in a bind and you don’t have cash, your credit card will be rendered useless if it’s maxed out.

5. Credit Cards are Sometimes Even Safer to Use Than Your Debit Cards

When traveling, credit cards are typically a safer option to use than your debit card. If you’re shopping in an unfamiliar place, and you have the misfortune of someone stealing your card information, have no fear! Any fraudulent transaction that occurs on your credit card will be reimbursed after your bank conducts an investigation on the matter. Also, because there wasn’t any, “true cash” being used, or in other words, money was not taken directly out of your checking out, you will still be able to enjoy the rest of your trip knowing that your cash is safe.

6. Relax. Credit Cards are not Scary.

While the looming responsibility of interest rates, due dates, and account monitoring may seem overwhelming, just know that you have nothing to be afraid of. Yes, your first credit card is, and should be a big deal. But think of your credit card as a stepping stone. Once you master your overall understanding of your first credit card and start to earn a good credit score, you’re ready to move on to bigger loans. Like the one you might need for your dream car someday. So relax. And don’t afraid to ask your local banker questions about your credit card if you have them. We’re here to help.

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