Credit cards allow users to pay for items or services in lieu of cash. However, a person should be responsible enough to understand that the card must not be considered free cash that can be spent with reckless abandon.
That is why, for some people, getting a credit card is seen as an important step towards becoming a full-fledged adult.
But without proper guidance, it is easy for first-time credit card users to fall prey to various sly marketing campaigns or end up in serious debt within a short amount of time.
Here are six of the most common mistakes first-time credit card owners make when using their cards and what can be done to avoid them.
1. Believing credit isn’t important
In the real world, having good credit is vital. Credit scores allow an individual to apply for mortgages and save up on car insurance premiums.
Without excellent credit scores, you won’t have access to lower interest rates or premium credit card rewards. Even potential employers and the landlord of your future apartment might check up on your credit score to see your ability to pay your debts.
By managing your credit responsibly from the get go, future credit card and loan applications are approved more easily and you can gain access to better offers.
You can also use your good standing to negotiate better interest rates on loans. Even credit cards with a limit of $200 can help build your credit score.
So apply for a credit card early, but make sure to use it wisely.
2. Spending too much
Credit cards offer users the opportunity to buy or pay for products or services that may currently be out of financial reach.
However, if you’re not aware of where your money goes and how much you spend on a monthly basis, you could quickly max out your cards and end up in crippling debt.
Live below your means. This is true regardless of whether you are still currently relying on your parents for financial support or working multiple jobs…
Continue reading the article and learn more about credit cards on James Watt’s blog.