If you’re just starting off in college or beginning a new job, you may find that you’re overwhelmed with credit card offers. But at this point in your life, it may be the right time for you to get on board as a credit card holder to start practicing credit usage and building good credit.
 
Figuring out how to manage credit cards is critical, especially for new borrowers. Before applying for your first card, you should start by asking the following questions:

• Is using a credit card the right way to pay for the purchase? Would cash or a debit card work just as well?

• Is it clear how interest is charged?

• Will any credit card fees be assessed? 

• Once the charge is made on the card, is it easy to track the minimum payments and due dates?

It can be helpful for you to run through these questions for each card. Knowing due dates, minimum payments, and other terms are key in using credit cards wisely.

Credit Card Tips and Advice

After you ask yourself those questions about the basics, it also pays to think ahead. Allow us to explain.

Many people who have run into challenges with credit cards have shared that the most important advice to follow is to make payments on time, keep credit card debt manageable, pay off balances, and maintain low balances to avoid high interest and late charges.

If you only make minimum payments while continuing to make purchases, your debt will quickly grow, which ultimately increases financial stress and could potentially derail your financial future. If you get into the habit of making late payments or taking on more debt than you can handle, then your credit score will suffer as a result, and you will have to take additional steps to repair the damage that’s been done.

As a new borrower, it’s extremely important that you take time to evaluate and understand your current financial picture, your spending habits, and the pros and cons of how access to credit will impact your financial situation now and in the future.

Where Should You Start?

There are loads of credit card offerings available to you, and as they fill up your mailbox or email inbox, it can be confusing knowing where to start.  

Some credit card companies look to pique your interest with introductory rates, rewards, travel/hotel points, no annual fees, cash back, application bonuses, and the list goes on. While that list sounds quite appealing, it’s important that you compare different cards based on your needs and the card terms.

For instance, at GOLD, we take pride in the fact that our card reflects the same qualities as the credit union itself: fairness, transparency, and stability. We’re committed to eliminating unnecessary fees and gimmicks. With a GOLD Credit Card, you’ll encounter no introductory fees, annual fees, or teaser rates. You'll enjoy instant borrowing power with low variable rates and high credit limits. Unlike other credit card providers, you’ll also enjoy not having to pay fees for cash advances and balance transfers.

For students and new borrowers interested in using credit cards wisely, it’s helpful to look at the following:

• Annual Percentage Rate (APR): This is how much interest you will pay if you do not pay off your balance each month. Also, for many credit cards, rates may increase after a short period of time.

• Fees: Many cards have yearly fees. Most charge for late payments, balance transfers, cash advances, or spending over your credit limit.

• Credit Limits: Your credit limit is right for you when it’s in line with what you can afford to pay back. Many people find that high credit limits offer challenges when it comes to managing the balance owed.

• Number of Credit Cards in Your Wallet: Figure out how many credit cards is the “right” amount for you. Managing one or two credit cards can be easier than having three to five (or more) cards.

• Spending Limits and Payments: When you reach the spending limit on one card, it’s best to manage those payments before shifting your purchases to another card.

• Budgeting: Planning monthly expenses and setting a budget is the best way to easily adjust your spending habits.

• Hold on to Your Receipts: Keeping your receipts helps with keeping track of monthly activity.

• Plan Your Spending: Having a plan will help you reduce the chance of impulse buying. When you have a plan, there’s less chance you will overspend on items you don’t truly need. Many new borrowers find that it’s necessary to use credit cards to cover important expenses such as food, gasoline, and utilities. If that becomes a regular pattern, it may be helpful to revisit your budget.

• Review Different Payment Options: Is it easier to pay through an app? Through a website? Over the phone? Usually you can set up automatic payments to pay the full balance or just the minimum payment by the credit card due date.

Next Steps for New Credit Card Users

Remember, every time you use a credit card, you take on new debt, and debt is borrowing money you may not have earned yet. It’s wise to always keep the focus on this fundamental truth. Beware of high interest credit cards that can become difficult to pay back if financial circumstances change unexpectedly.

It’s all about the basics. Be sure to look at monthly expenses, your income, set spending priorities, and build up emergency savings. As a new credit card holder, these principles will be the building blocks of achieving financial success!

New borrowers should reach out to a trusted independent nonprofit resource, like our partners at GreenPath Financial Wellness. Everyone who contacts them will receive a free financial counseling session with NFCC-certified counselors who lend an emphatic ear, look at the entire financial picture, and work with you to develop a customized plan to achieve financial wellness.

And when it comes to applying for your first credit card, be sure to keep GOLD in mind! Apply online or give our lending team a call: 484-223-4216.