Getting a credit card is the first step towards becoming a financial liberal, but your work is not done. You need to select the right credit card for yourself in order to maximize its benefits. After that, the main step is to know how to manage a credit card. Credit cards have their own pros and cons, and using a credit card wisely can help you from landing in a debt trap. Those who are already familiar with the working of a credit card know how to use a credit card, the issue comes with first-time credit card users who have no idea about the credit cards. We have listed down a few tips for managing your first credit card.
1. Set Budget
The first and foremost thing is to set your budget. Jot down every expense that you have in a month and your income on a page. After writing your expenses, check which ones are essential and which ones can be avoided, also spread your expenses between two parts, one that needs to be made using a credit card and the other that you can pay directly through cash. Setting a budget gives you an idea of whether you are spending unnecessarily or not.
2. Keep track of your purchases
After setting the budget keep track of your purchases. Keep the receipts with you so that you can verify the same with your credit card statement. Tracking purchases keeps you informed about the errors and omissions in your credit card statements, also it keeps you in check from overspending.
3. Pay bills in full
This is the most important step to remember that you need to clear the credit card dues in full. You can not just pay the minimum due amount to avoid the interest charges. Paying the minimum due amount only helps you from avoiding late payment charges and not interest charges. Defaulting in payment can lead you to a possible debt trap. For managing the first credit card one can register for auto-debit services that automatically deduct the credit card bill amount from the account. You will never miss the due date with it.
4. Set credit threshold limit
Another technique to manage your credit card is by checking that you do not overspend. You can set a credit threshold limit so that on reaching the threshold limit you will receive a notification that will help you avoid overspending. Keeping a low utilization ratio between 30% - 40% will also help you in building a good credit history and a strong financial profile.
5. Check credit card statements regularly
Keeping a track of your credit card statement helps you save yourself from the credit card frauds and errors and omissions. Errors and omissions can impact your credit score negatively, so whenever you find such mistakes report them as soon as possible and get them resolved.
6. Redeem rewards
On using a credit card, you earn rewards. You get a validity period to redeem those reward points. To maximise the benefits of a credit card you should redeem the reward points within the redeemable time frame.
7. Know all the fees and charges
One of the biggest mistakes that one can do is not knowing everything about their credit card. You should read the most important terms and conditions before applying for a credit card so that you can be aware of all the fees and charges that a credit card has. Otherwise, getting a credit card can sometimes cost you a fortune.
Bottom Line
To summarise, managing a credit card can be tiresome for the beginners. The above-mentioned tips can surely help the first-time credit card users in using a credit card wisely. The first and foremost step is to apply for the right credit card which is only possible when you analyse your spending habits and financial health, and after that you need to compare credit cards online to figure out which one will be the best for you. The key to managing credit cards is always keeping the credit card bills clear in full and maintaining a low credit utilization ratio. Being responsible is the first step towards a strong financial health.
Comment down any other tips that you may think will be useful for other readers as to how one can manage credit cards.