There’s always a good reason for your first credit card. You’re heading overseas, and want an emergency back up. You’ve just gotten your first job. You’re making a big purchase and want to pay it off slowly. Everyone else has one.
Whatever the reason, and however good the initial intentions, if you don’t start out using your credit card properly, it has the tendency to own you. I got a credit card for an overseas trip, used it a bit too much and, by the time I was back home, I was in a credit state of mind, the effects of which I am still paying off.
So what should you do, with your first bit of plastic in your pocket? Probably don’t head straight to Myer and blow your limit. Other than, the good people at Forbes had some tips, which have kindly served as inspiration here.
Think about your rating
People differ about the value of a good credit history. No one suggests you try and have a bad one, but operating in a world where you can only get a loan or rent an apartment based on your proclivity for credit seems a bit crazy to me. Personally, I think people are starting to move away from credit history as the be all and end all. Should you have a credit card, make sure your rating stays positive as it will be one thing that banks and landlords have a look at.
If you’ve just graduated from uni, you’re probably already in the habit of reporting your every move to Centrelink. It’s not quite as rigorous as those processes, but ensure that your issuer knows your employment status and salary. This will be reflected in your limit, which may or may not be a good thing, but certainly makes you feel very grown up.
Debit cards should be your major card. Credit cards involve instant gratification and delayed pain, and are dangerous for just that reason. Use debit first, and credit sparingly. You can even get a debt card that acts like a credit card for online purchases, but debits money from your savings account.
Try to not use more than 30% of your credit card limit. Not only will it leave you disciplined about how much money you’re putting on your card, it will make your bank confident in your ability to pay off your credit card.
Pay it all on time
Credit cards will end up killing you, if you don’t pay them off in full at the end of every month. If you can’t pay it all off, reconsider your budget. Have a look at using some of the money you set aside for saving for getting back on top of your credit card. Paying back the minimum once you’re ensconced in debt will make it very difficult to get free of the credit crunch in the near future.
Check it out
Don’t just pay your balance unthinkingly. Don’t assume that everything is okay with your credit card; check it every month. Beyond anything, it will help you see where you are spending money and how you might be able to cut down on unnecessary expenditure.