Fact: Using a credit card can be downright confusing – especially for the first time. It’s pretty crazy to think that a single piece of plastic can seriously impact your future (i.e. your credit score, which comes into play when the time comes to make big purchases, such as a car, a home, etc.). It’s not hard to manage a credit card by making small, monthly purchases and paying your bills on time – but it’s not hard to make mistakes, either. Before you decide to apply for your first credit card, consider having a discussion with a parent or guardian and doing research on your own. Here are some basics you will want to know:
Credit card key terms
Credit line (also called credit limit): This is a limit placed on your credit card that indicates the maximum amount you are able to charge. Most credit cards designed specifically for students have a low credit limit. If you charge over your limit, you will most likely be fined and the charge will be declined; make sure to check your credit card’s rules and policies.
Minimum payment due: This is the minimum amount of money that you are required to pay to your credit card statement each month.
Payment due date: This is the deadline for paying your credit card bill each month. If you make a late payment, you will be charged a late fee. Again, make sure to check your own terms and conditions for your credit card’s policy on late fees.
Billing cycle: This is the period of time between when you are billed. Typically, this cycle is between 20-45 days, but can vary depending on your credit card. During the billing cycle, any charges made on your credit card are posted to your account.
Grace period: This is the window of time between when your billing cycle ends and when your payment is due.
Statement: The statement outlines the charges you have made during the billing cycle and displays the amount you owe. Your statement will show your charges in chronological order, including the dollar amount, the date, and where the charge was made. Statements can be received online or by mail, depending on your credit card/preferences.
Start out small
Getting your first credit card can be exciting, but don’t go all Rebecca Bloomwood from Confessions of a Shopaholic on us. Instead, start out by making small purchases on your credit card each month. Maybe you will use your credit card for gas once or twice a month, or for groceries every few weeks. Don’t be so afraid to use your card that you do not use it at all; this can actually be harmful to your credit score. Make one small/regular purchase per month, and pay it in full by your payment due date. This is the simplest and best way to begin building credit while not going overboard.
Pay on time
Late fees are a great way to lower your credit score immediately – and rack up extra fines that could have been prevented. One mistake that I made when I first started using my credit card was making payments to my account multiple times during the billing cycle; I thought this was OK because I would have a balance of $0.00, and I was paying on time. However, this was unnecessary. Instead, it is most beneficial and logical to pay the amount from the billing cycle specified on your statement. There is no need to overcomplicate things by constantly “paying off” your credit card balance; just pay in full and on time when you get your statement.
Look before you swipe
When using any type of card – debit or credit – watch out for loose, broken, glitchy or just downright sketchy-looking ATM machines or card readers. It seems as though college campuses are meccas for card readers that appear to have been tampered with or constantly request more swipes than needed. Not all ATMs, laundry machines or other card readers are unreliable, but students should be cautious before automatically swiping away – especially when they need to enter a PIN. When in doubt, try to use ATM machines that are in secured buildings, banks, or somewhere with an attendant nearby. If you are at an ATM on a busy street or a crowded area with people around, check to make sure that someone is not looking over your shoulder as you enter your information. It may seem a little excessive, but it’s better to be safe than to have your information stolen.
What is fraud?
Fraudulent charges are charges that the credit card company has flagged as suspicious; perhaps the charges came from an irregular location or charged an excessive amount to the account. If you ever notice suspicious charges on your account, immediately contact your credit card company; there should be a phone number on your bank’s website/mobile banking app and even on your credit card. Your credit card company may even contact you notifying you of the fraudulent charges and that your account has been frozen. Dealing with fraud can be scary and frustrating, but luckily, with mobile apps and technology, debit/credit card holders are typically notified with an alert of suspicious card activity, and credit card companies are often diligent about tracking fraudulent charges. Also, fraud can happen to anyone, so if it happens to you, don’t feel like it’s something that you did – it can be fixed with a simple phone call and new credit card information. Nonetheless, it does not hurt to check your account activity often and report suspicious activity.
Getting your first credit card is exciting, but it comes with responsibility. When in doubt, contact your credit card company, a parent or trusted adult about your card’s terms and conditions. Each credit card is different, so keep this in mind when doing research and deciding on a card that is right for your needs.
This whole #adulting thing can be kind of scary at times, but we’re all in this together.