Whether you’re just starting out in life or are trying to recover from a financial setback like a job loss, knowing how to get the most benefits out of a credit card is a great way to boost your confidence in your money-handling skills.
Choosing a credit card is an exercise in comparison shopping—and that’s a skill you can apply to all kinds of financial situations.
Start by determining if a card has annual fees. Does it offer rewards that are meaningful to you, like the waiver of baggage fees on airlines if you’re a frequent traveler?
Once you’ve narrowed down your choices to a few cards, take the time to read each application carefully and make sure that you understand it. You’ll have to familiarize yourself with terms like annual percentage rate (APR), fixed rate, variable rate, periodic rate, prime rate. Do you know what a secured card is? What the credit card issuer means when it talks about average daily balance? What does it mean to have a charge posted to your account?
If you need help, start with the glossary and the blogs here on creditcardxpo.com for lots of useful information about how credit cards work. Government sites like the Federal Reserve Board’s “Consumers’ Guide to Credit Cards” and the credit card section on the Consumer Financial Protection Bureau site are also reliable resources that explain some complex credit-related terms in a clear and easy-to-understand way.
Once you’ve found the right credit card, your next step is to learn how to use it to your advantage.
It’s tempting to go on a spending spree when you get your plastic, figuring you can always pay it back over time. Resist that urge. Decide up front how much you’ll allow yourself to charge on your card each month, and stick to that budget.
If possible, pay off your card at the end of each billing cycle. It’s smarter to spend the money on things you want—new clothes, a meal out with friends, etc.—rather than paying that money to the bank as interest on an account balance that you carry over from month to month.
Get your payment in on time to avoid late fees. Set up a reminder on your phone calendar or see if you bank will let you sign up for email reminders when your payment due date is getting near.
Did you know that you can use your credit card to boost your credit scores—and what that higher score could mean to your borrowing power further down the road? Using a credit card gives you the opportunity to discover how credit works and how you can use it to your best advantage. Financial savvy like that will be a big help—and a real confidence booster—when you apply it to other credit situations, like taking out a vehicle loan or applying for a mortgage.