8 Tips for First-Time Credit Card Users
Credit cards have become a convenient way of buying things without worrying about whether you can afford them. By the end of the 2nd quarter of 2022, the total number of debit and credit cards circulating in India has almost reached 1 billion.
This demonstrates the growing popularity of credit cards. As it offers benefits such as long credit-free periods, insurance coverage, reward points, cashback, etc., more and more people are adopting credit cards.
However, you should keep an eye on your credit card spending; otherwise, it can lead you towards a debt trap. So here is a list of some important tips that beginners should always follow when using a credit card.
What Are the Best Tips for First-Time Credit Card Users?
The convenience of availing credit cards can often lead you towards financial downfalls if you do not inculcate smart habits. Let’s check out the top 8 tips that can help you to spend more wisely.
- Select a Card Depending on Your Need
Today, several credit card products come with numerous benefits depending on an individual’s spending patterns or needs. Therefore, if you want to make the most out of your credit facility, it is imperative to analyse the benefits you are looking for.
For instance, if you are a shopaholic, you need a shopping credit card or an online shopping card. On the contrary, if you want to take advantage of instant savings accordingly, you can choose a cashback credit card. Similarly, frequent travellers will want to choose a travel credit card.
- Ensure to Pay Your Bills on Time
This is one of the most crucial rules of credit cards. A credit card comes with features of offering an interest-free period of up to 50 days. Within this time, you can borrow money to buy things and pay them back without paying any interest.
However, you cannot take advantage of this benefit unless you pay your credit card bills on time. To manage the scenario you can set a monthly spending limit and spend it accordingly. Moreover, if you fail to pay your bills on time you can end up paying very high-interest rates and other penalties.
- Read the MITC Thoroughly
If you are a first-time user of a credit card, it is crucial to check the MITC (Most Important Terms & Conditions) document that you have received with your card. The MITC contains vital information that may assist you in understanding the fees or charges better.
Through the MITC, you can check if your credit card offers lifetime free credit, reward points and other details. If you know the terms and conditions of your credit card you can easily redeem your reward points or other benefits before they run out.
- Maintain a Low Credit Utilisation Ratio
The credit utilisation ratio is the sum of all the balances you are using. It signifies the scenario where you borrow money up to a maximum credit limit, pay it back over time and borrow again if required.
Therefore the more you are spending on your credit card, the higher your credit utilisation ratio. A credit utilisation ratio comprises 30% of your credit score and so it plays a crucial factor in determining the credit score.
This is why it is necessary to maintain a low credit utilisation ratio. It is advisable to aim for 30% or less.
- Avoid Cash Advances
Cash advances are the act of withdrawing cash from an ATM against your credit limit. Many card issuers offer cash advances with a certain limit, which you can take advantage of.
But it is advisable to avoid such offers as whenever you withdraw money from a bank or ATM through your credit card, you have to pay cash advance charges. High interest is charged on the withdrawn cash on a per-day basis, which can add up to a lot of expenses.
- Keep a Track of Ongoing Credit Card Offers
First-time credit card users should always watch ongoing credit card offers. Many financial institutions partner with popular merchants and provide various offers like cashback, discounts, free EMIs, and other benefits. However, before availing it, you must pay close attention to the expiration dates, limits, etc. You can stand a chance to save a lot of money with these deals.
- Avoid Increasing the Credit Limit
When you receive a credit card, the bank or lender will give you a limit on how much you can spend on it depending on your creditworthiness. Over time, many financial lenders will entice you with numerous tempting offers to increase your credit limit or upgrade the card. In that case, it is necessary to stick to your actual credit limit and avoid such lucrative offers.
However, if you are willing to go card upgrade or credit limit increase wait for 2-3 years unless you have received a significant income boost. Also, be mindful while making any expensive purchase.
- Keep Your Credit Card Secure
The information present on credit cards like CVV, card number, validity, etc., are sensitive and must be kept safe. Always keep in mind not to disclose such information to anyone as strangers can make use of it without your consent or knowledge.
For security purposes, ensure to change the PIN before using it again. Additionally in a marketplace always check to see that your card swipe is carried out correctly. On the other hand, if you are making any online purchases, always use a reputable website that will not store any of your card information.
A credit card is a great way to make payments as it comes with numerous benefits that you can utilise if you use your card responsibly. If you are a first-time credit card user, always keep in mind to avoid falling into the trap of lucrative offers credit card issuers offer. The best way to manage your credit card is to use it responsibly in accordance with your financial capabilities.
Frequently Asked Questions
How do I use a credit card for the first time?
Choose your card carefully, and be aware of all applicable charges and fees. Try to pay your bills in due time, be mindful of credit card usage and always use your card at trusted merchants.
How many credit cards should I need to have?
It completely depends on your financial capabilities and how you are using them. There is no magic number for credit cards. If you wisely utilise the right type, you get to earn rewards or benefits on various expenses.
Should I pay off my credit card balance after every purchase?
It is a good idea to pay off your credit card balance in full if you have the financial capabilities. It completely depends on your choice.
How can I avoid interest on my credit card?
You can avoid interest on your credit card by paying the statement balance in full before the due date. You can also go for a balance transfer, avoid using credit cards abroad, and deposit cash withdrawals as early as possible.