You’ve finally been approved for your first credit card. Congrats are in order, but so is a bit of advice. The granting of first time credit by a bank or credit card issuer is serious business for you and for them. From their perspective, you represent a reasonable risk and a potential smart credit user. You have a right to be proud of yourself because today, credit just isn’t that easy to get. The credit card companies know that you are new at this and they try to be as cordial as possible to entice you into other offers that come your way, courtesy of them. This is one way the company will try to make you use your card. Suddenly, you have a balance and the payments will start very soon. Do yourself a favor and don’t accept these offers just yet. It’s best to just ignore them.
Use their money instead of yours
To maximize the benefit of having a credit card, always remember to charge only that amount you can pay off completely before the next statement arrives. This is a way to literally use their money interest free. The opposite of this is allowing your balance to grow unabated until one day your limit is reached. This is a sign of irresponsible use of credit, and your credit score will reflect that. If you stick with spending only that amount you can payoff in one month, your credit score will stay high and you won’t be saddled with unnecessary debt and high interest payments. Keep your credit card balance as low as possible so the money will be available if an unexpected expense comes your way.
Watch your credit score improve
Another benefit of keeping your balance low is the positive effect on your credit score. Your score will be higher if you show a low outstanding balance with a high, unused credit limit with activity showing the balance is paid off every month.
If you do carry a balance, it’s absolutely imperative to stay current on those payments. Better yet, always try to pay more than the minimum the statement asks for. In fact, the quicker you pay the balance off completely, the more money you’ll save and the better it looks for your credit score.
Watch your score
Not knowing or understanding your credit score can cost you big time. Let’s say you apply for a car loan and you’re going for that low advertised payment. Sounds good, you can afford it, and your car is lousy anyway, so buying a car is a good idea. The shocker comes when the salesperson tells you he can’t get the best rate for you because of your credit score! Only a few points can make a big difference. If you’re planning a large purchase, be sure to check your score well ahead of time so you have time to possibly improve it before you sign the papers.