Four Tips To Know Before You Get Your First Credit Card

Having a credit card might be a concept that seems alluring with its sense of freedom and adulthood, but have you ever looked at the fine details? Before you sign on the dotted line, be sure to do your research – or at very least continue to read on! Here's our four tips to know before you get your first credit card:

Credit Card Defined

First and foremost, let’s answer the most basic question: what is a credit card?

A credit card is essentially a piece of plastic that has your name stamped on it, and links to a financial account that allows you to use the bank’s money instead of your own to pay for goods and services. Then you get to repay the bank over time – with interest, of course.

Credit Cards are NOT for Everyone

Though it may certainly seem that everyone and their dog has a credit card in their name, don’t be fooled: credit cards are not for everyone. Generally speaking, if you are unsure about credit in general, a credit card is not for you – yet. Also, if you suffer from a lack of self control or if you are in the process of repairing your credit, we recommend avoiding credit cards.

Credit Card Payments

Once a month, your credit card company will accumulate your purchases made on the card over the month and send you a bill. The best way to repay your credit card is in full by the required due date. Beware: paying the entire amount of your credit card bill as soon as you receive it and well before the due date can actually negatively affect your credit score over time. The point is to let the credit amount sit for a while, and then pay the full amount upon the due date to build a credit history.

Your Minimum Payment

If you’re like many people, you may try to avoid paying the entire amount on your credit card bill. Though this is strongly warned against, you MUST pay at least your minimum payment on the due date of your bill. Though this will result in much higher interest charges month-to-month, quickly doubling or tripling the cost of your purchases, it at least won’t result in negative impacts to your credit score.

Ultimately, you need to have the right mindset around credit cards before you jump in and sign on the dotted line. If you think you’ll treat your plastic like loan and not free money, then you might just be ready to get your first credit card.