There is a lot of fun to be had when you use your card. Before you start spending, however, there are some things that you need to understand.
You need to understand how to use your credit card correctly. This means knowing:
What your credit limit is
What you can and can't buy with it
How much your
will cost you
Any fees you may need to pay
How much your minimum monthly repayments are
Used properly, credit cards are a valuable financial tool. If you spend on them in a sustainable way, and never miss a monthly repayment they can build up your credit score (which is important if you ever want to apply for a mortgage, loans or better credit cards in the future).
You can also earn money, travel and gifts with rewards program as many credit cards offer frequent flier miles, points and cash. Importantly, with a credit card you can benefit from protection on your purchases, which is useful if you're buying something big in advance like a flight or booking a stay in a hotel, where these is a risk of the company going bust.
Read more on all of these in the comprehensive Uswitch guide to credit cards.
Despite the benefits of credit cards, there are risks to first time card users problems, namely the temptation to purchase items that are beyond monthly budgets.This temptation is the most important thing to guard against when you use your new card.
It's not wise use the card as a means to finance extravagant items that you cannot afford: eg new phone, designer clothes or expensive holidays. But don't forget that even small purchases will add up over time.
If you are not careful, you can be in for an unpleasant surprise when the bill arrives. Required monthly payments are usually a small fraction of the total amount borrowed, and it's easy for inexperienced borrowers to generate more debt than they can reasonably repay without seeing the problem until it is far too late.
Store cards can seem like an attractive option but make sure you know about the drawbacks before signing up in store to get the discounts and membership perks. Read our dedicated guide on the pros and cons of store cards.
The best rule of thumb for a first time card user is to purchase only what you can afford to pay back in full each month. Track your total charges throughout the month until you are accustomed to using the card, to avoid accidentally creating big debts that could take years to repay.
If you're a first- time credit card holder and would like to know more, then read our 7 tips to help you prepare. Read more...