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Got your first credit card? Here’s how you need to use it!

Thus, you just got your hands on your very own first credit card, ever! 
It’s a wonderful merry time, and the card looks pretty.


You might think that you have the whole world to yourself now, with that 4 digit credit limit that you have!

You might think, that new possibilities are peeping through your windows, as you hold the card tight!

It’s like, having a sigh of freedom and independence, just by taking a mere glance at that card! It just literally means, you can do so much, with this new money power!

But, hey, wake up! 
You are not getting the swindle mate, that you can land into, with a single wrong step taken with that first credit card of yours!

Got your first credit card Here's how you need to use it

Credit cards are developed by banks and financial institutions, so as to get consumers bound in a long term debt agreement.

To keep in mind, that the more you are carrying a balance on your card, more is the profit counted by banks and creditors.

For the longer you keep a fat balance on the card, the higher will be money charged, in shape of interests, by the credit card issuers.

And, that’s when, the need to learn the proper usage of your first credit card, appears in the scene.

Let’s get the paradigms and theories of using the card, rolling then!

Remember, the first credit card marks the start of your personal credit history

You need to build your credit with it.

This card really has the power to get your debt health boosted. You should use this card quite sensibly, to build your credit.

Do transactions that your debit portfolio can afford. This rule is valid at least for the first year with the credit card.

Maintain a minimal balance on you card. If the credit limit is in thousands, then keep a balance in hundreds.

There is this credit utilization ratio, which is calculated by the formula, [{Owed balance / total credit limit} * 100%].

Try to keep this ratio less or equal to 30%. Anything beyond that, will cost you big time! This ratio is used to determine your credit score.

If you can’t keep up a good credit score, always, then it will hamper your future debt and credit oriented decisions. 

You might not qualify for good home loans, or a low interest car loan, or even be deprived of new credit card offers, and miss out on opportunities of credit limit increase.

Hence, this card is your tool to develop and customize your credit portfolio, just the way you want.

If you want to ruin it, then max out your card, by doing abrupt purchases, and don’t pay off the debt for months!!

But, if you want your credit portfolio to shine bright, then follow the 30% utilization ratio, just as discussed above.

Only make transactions, that you deem to be fruitful:

Here, in the field of finance, we have a concept called good debts and bad debts. This categorization is based on the effectiveness, a debt has, on the debtor’s life.

There are so many debt instruments in the market, and credit cards just make up one sector of them. As of the others, you have home loans, personal loans, payday loans, and so on.

Now, debts come in two forms, secured and unsecured

Secured debts are backed up by any financial asset, like savings accounts, or a house, or a car, for example.

But, unsecured debts have no such thing called as assets. Credit cards fall under this category. Also referred to as consumer or household debts, these are not considered as good debts.

The reasons are also quite obvious. We use credit cards for every shopping spree we go on. The materials we buy with credit cards, usually depreciates in value over time. Also, we use these cards at pubs, restaurants, hotels, and so on.

All such transactions have no asset potential.

Therefore, consider your credit card as wealth available to you, to do something good. Think of it as an investment tool.

Buy objects with it, that appreciates in value, or use it for moral investments, like doing transactions that help to build your career, your education, or that escalates your wealth. 
So, you got to use it only for the things, that you believe will have a good return in the future.

Beware of credit card debt from the very first day, you start to use your first card

The beauty of credit cards is that, it starts to accrue debt in no time. 
Infact, to your surprise, you will see that within few months time, you have crossed 40% of your utilization ratio.

Hence, you need to be smart at handling those credit card debts, from now only. 
Do your own research, and dig out your ways to become debt free, that you can use later if the balances get out of hand, and becomes difficult to manage.

But before, we end this post here, there’s another thing to warn you about. Try to pay off your balances in full, each month. 
There are many hidden fees and penalties levied by credit card companies, that consumers are in general not quite aware of.

Don’t forget to dispute unauthorized purchases under Section 75, and any other fees or charges, that you think to be unethical.

Do something extravagant with your first credit card! Use it to expand your career growth and opportunities.

Have a happy and peaceful life!

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