April Lewis-Parks | June 7, 2013

Five tips for first time credit card users

With millions of college students graduating, and entering the real world, the majority will be taking control of their finances for the first time.

One of the recommended moves to complete during this time is to obtain a credit card, and for some, this will be the first card they ever have.

To avoid being bogged down with credit card debt, these recent college grads need to educate themselves on how to handle their first card.

Make sure you understand the terms

Oftentimes, credit card terms can be confusing. That being said, first-time credit card users need to ensure they understand all the specifics about their card. For example, many providers offer 0 percent APR during an introductory period. However, after this time has ended, rates usually rise markedly, and first-time cardholders need understand this as failing to do so could lead to their balances accruing interest without them even knowing.

Other terms that need to be known include any fees they will be charged – i.e. annual fee, late fee, foreign transaction fee – and the payment schedule.

Never go over the credit limit

Each credit card a person receives comes with its own limit, and breaching this threshold could lead to trouble. Not only does this prevent them from being able to use the card until it is paid down, going over the limit can lead to fees and rate hikes. That being said, people who have a credit limit of $1,000 should never go over that amount. In fact, it is recommended to only use around a third of the credit limit.

Pay in full, and on time

First time credit card users need to also remember to always pay on time, and pay in full when they can. Missing a payment can severely damage a person’s credit score, and potentially lead to fees and rate hikes. Cardholders can help themselves out by setting up payment reminders through email or text, which most credit card providers offer these days.

Meanwhile, failing to pay in full means credit card users can incur costly interest charges, and APRs on cards for first-time users are often 20 percent or higher. The best way cardholders can ensure they pay in full each month is to never spend more than they are able to pay back.

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