There are four main things that I wish someone had told me about credit cards years ago. To get right into the reading, feel free to skip down to the headings. Otherwise, if you’d like a brief introduction to my history with credit cards, continue reading.
I was 18 years old when I got my first credit card. I hadn’t even been out of high school before the offers began rolling in. Getting a credit card was a sign of adulthood, and I was too eager to grow up.
However, I didn’t realize how little I knew about credit cards.
My first credit card came with a mere $500.00 limit. As a poor girl making less than $7.00 an hour, that was about a month’s worth of paychecks.
I don’t remember if my first shopping trip was for new clothes or just food for the family, but I remember that it didn’t take long before I maxed out the card.
The following month, the first bill came. “Only $25.00”, I thought, “what a deal.” The young, stupid me felt that the credit card company was doing me a favor. How nice of them to let me borrow $500 and pay them back only $25 a month.
Of course, we all know how this story ends.
I’m sure you’re not reading this article to find out all the wrong ways to use a credit card, so I’ll skip all the shameful details of my youth and jump straight to the point.
There are many things that I wish I had known about credit cards before I got one. Those are the things I will share with you in this article.
No. 1 – Credit Cards are not Meant for Your Benefit
Reread the subheading if you didn’t get it the first time. Credit cards are NOT meant for your benefit.
Banks issue credit cards to make a profit. The minute you are issued a credit card, the bank is “banking” on its ability to get you in debt and keep you there.
Even though credit cards are not meant to benefit you, you can still make them work to your advantage if you learn how to use them the right way.
No. 2 – Credit Cards are not Free Money
A credit card is not a ticket to buy things you wouldn’t otherwise be able to afford. I wish someone had told me this before I maxed out my first card.
A credit card is an opportunity to borrow money. The keyword here is opportunity. Just because you CAN do something doesn’t mean you should. The case is often valid for credit card usage.
When you use money on a credit card, you will have to pay it back, and the longer it takes you to pay it back, the more you end up paying.
No. 3 – The Minimum Payment is a Trap
I wish someone had told me that the minimum payment on a credit card is the bank’s way of bleeding as much interest out of me as possible.
The best way to use a credit card is to pay it off in full each month.
No. 4 – Using Too Much of Your Credit Limit Hurts Your Credit
Maxing out your credit card is never good. However, you could also hurt your score by using too much available credit.
If your credit report shows that you are using more than 10% of your available credit, creditors will see you as a credit risk.
If your credit limit is $1,000.00, you should only be using about $100 of your credit each month.
Learn how to bypass the 10% rule in my article here.
