subject: Using A Credit Card To Establish Credit History [print this page] Getting your first credit card can be a rite of passage for some. No sooner have they finished high school, or gone on to college or university, and they are suddenly on every credit company's mailing list, being invited to get their first credit card. However, before you take the plunge and sign on the back of your brand new card, here are a few things that can help you use your card effectively to build a positive credit history.
One of the biggest mistakes that new credit card holders make is using their card for consumable products. While the temptation is great, especially with cards that are linked to the acquisition of loyalty points or miles, do not use your card at the grocery store or the gas station. It is far too easy to use up the full credit limit with tiny purchases that do nothing to improve your life overall.
Some financial analysts suggest that you leave your card at home in a safe place. Never, however, should you leave it in the freezer. This prevents you from indulging your every whim and taking part in impulse shopping on a day to day basis. This also gives you an out when you go into a store and see something that you think that you really want. It gives you time to completely review whether having that flat screen, high definition television is an essential and that you can afford it or just something that you really wanted.
When you travel, having a credit card can be useful. With it, you can reserve your seat on an airplane, bus, or train. You can book your accommodations without fear. However, no one said that you actually had to pay with the card once you are there. You can always simply pay with cash or traveller's checks if you have them available.
When travelling by air, you will need a credit card to reserve your seat. However, you could still pay for your seat at the ticket counter if you have the correct currency. Ask your travel agent or the airline you are travelling with what their policies are regarding payment.
The simplest rule to keep when you have made a purchase on your card is to pay it off immediately. Do not let the full value of your purchase sit on your card for years and years. Pay off the whole value of your purchase right away. If you can not pay it all off at once, at least make a payment for the minimum monthly amount. And always pay off your larger purchases within a year of the date you purchased it.
Interest rates with credit cards are quite high. Some are higher than twenty one percent per year, compounded monthly. The sooner you pay off your bill, the better. Not only will this save you money, it will also improve your credit rating with the card company.
Credit companies love it when you spend. They love the interest that they earn on your purchases. But do not make them too happy - instead, make yourself happy by only using your card occasionally, and then promptly paying off the balance. Then, the companies will see that you are a good credit risk and they will be happy to help you borrow for your next big purchase.
