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Be Disciplined With Your First Credit Card

Nov 15, 2007
It can be so easy to think of the funds available to you through your credit card as free money, especially when it's your first card. You never actually see any cash--you just hand the cashier this piece of plastic that some nice company sent you in the mail, and the cashier gives you your purchases. You don't see the cash until it starts disappearing from your savings, after you've maxed your credit card out and are buried up to your neck in late fees and penalties, and your credit score starts going down the tubes.

That's why it's so important that you establish disciplined credit card practices from the first day you get your card. Responsible credit card use can build you a great credit history and help you toward a great future, but reckless credit card use can throw your finances off-course for years. Start on the right foot with your credit card, and side-step the worries.

The most valuable piece of advice you can when it comes to responsible credit card use is so simple that many people overlook it: never carry a balance. Especially when you've only just started using your credit card, you should never make purchases with it that you don't already have the money to pay off.

This might seem counterintuitive. If you already had the money, why would you be using a credit card? Learning to use your credit card intelligently when you first start out requires a little re-thinking of what your credit card can provide you. You should think of it as a means to build good credit, possibly get rewards points, and a source of funds for extreme emergencies--and that's all.

Most credit cards available to first-time users don't have the best interest rates, so overextending your budget on your first card is never a good financial move. You're paying more interest on the loaned money than you should, and by paying more interest, you're making it less likely that you'll be able to pay off your balance. If you can't pay off your mandatory minimum, you're incurring even heavier fees, making it even less likely that'll you'll be able to pay off your balance. To add insult to injury, if you're falling behind on your payments it will affect you're credit score, making it less likely that you will be able to get a credit card or loan with a better interest rate in the future. Sound like fun?

This might all sound like an extreme example, but exactly this is happening to more and more people every day. Don't get caught up in the cycle of bad debt. Keep careful track of your credit card expenses, only using it when you are certain that you will have the money to pay your balance at the end of the month. Make sure that you always make your payments, and always make them on time, to avoid costly an avoidable fees and penalties.

It might seem difficult, but a little discipline will go a long way toward protecting your financial future. By using your card sparingly, you will be building a stronger credit history, making yourself eligible for better credit cards and loans with lower interest rates. Then, if you absolutely have to, carrying a balance won't be as costly. Not only that, but you will be teaching yourself highly valuable budgeting skills that will help improve your quality of life, for the rest of your life. So which sounds better--budgeting carefully, or a new flat-screen TV that you wouldn't be able to afford without your credit card?
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