Getting Started with Credit
If you are just starting to use your first credit card, start slowly. Don’t make full purchases on your credit card. Instead, make small purchases on your credit card and pay off the balance in full every month. The goal of a credit card is not to buy things you can’t afford. Rather, you want to use the credit card to start building a good credit history and good credit habits.
Note: Do this with a bill of about $20 so that you can easily pay it off each month.
Increasing Your Purchases as You Prepare
Once you have established the habit of paying your bill in full, you are better prepared to use your credit card for slightly larger purchases. Continue to keep the value of your purchases low to ensure that you are not using more than 30% of your credit limit. For example, if your credit limit is $100, do not let your balance exceed $30.
When you purchase with a credit card, set aside enough money so that you don’t spend it before your bill arrives. Then, when it’s time to pay your credit card bill, you already have the payment ready. In most cases, you won’t have to wait for the bill to arrive. You can make a payment on the credit card as soon as the transaction clears and is added to your account balance.
Note: If you use your credit card irresponsibly, the credit card issuer may quickly reduce your credit limit.
Practicing Self-Discipline
Using a credit card the right way requires self-discipline. You will have to say “no” to yourself when you want to use the credit card to buy something you won’t be able to pay off in full at the end of the month.
When you set aside money to pay your credit card bill, make sure not to spend it on anything else before your credit card statement arrives. Remind yourself that you have already spent that amount of money that you set aside – you haven’t received the bill yet. If the temptation is too great to handle, send the payment as soon as the transaction clears to your account.
Note: Start with just one credit card so you can easily manage your payments. Multiple balances with different due dates can lead to confusion, which ultimately results in debt and a damaged credit record.
It’s easy to accumulate many credit cards, especially if credit card companies continue to send you card offers. You can opt-out of credit card offers so that you aren’t tempted to open new credit cards. If you choose to opt-out of offers temporarily while you get used to using credit, you can subscribe later to get the best credit card deals.
Monitoring Your Activity
Most credit cards allow you to view your account activity online. You may also be able to download a mobile app that lets you quickly check your balance on your phone. If your credit card allows for this capability, enroll so that you can monitor your credit card balance and pay your bill online. You can even sign up for electronic billing statements, allowing you to receive your statement online instead of via regular mail.
Knowing the best way to monitor your credit activity depends on understanding your habits and what works best for you. Some people need a paper credit card statement in the mail to remind them to pay their credit card bills. If you need a physical reminder, don’t sign up for electronic statements. If you check your email inbox more than your physical mailbox, you’re likely fine with electronic bills.
Plan
For times when you can’t pay in full
There may be months when unexpected expenses prevent you from paying your balance in full. During those months, at least pay the minimum amount and do not increase your credit card balance by making additional purchases with the credit card.
If you know you don’t have enough money to pay off your credit card balance, set the card aside. Do not use it again until you can afford what you owe and any new purchases.
Note: This is the benefit of paying off your balance in full – you don’t have to worry about keeping up with payments if your income goes down or other expenses increase.
Summary
Building a good credit history takes time, so don’t try to rush it. Use credit responsibly and a great credit record will follow you. If you start with excellent credit habits, you won’t have to face the hard task of repairing your credit history later.
Source: https://www.thebalancemoney.com/how-to-use-credit-the-right-way-960107
Leave a Reply