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Keeping Your Financial Freedom: Credit Card Tips for New Card Holders

Friday, August 29, 2014
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When you first get a credit card, there seems to be a great degree of freedom. Unfortunately, far too many young adults end up over-spending, resulting in a burden of credit card debt. Knowing how and how not to use a credit card is important if you want to retain your financial freedom. Here is a quick list of some dos and don'ts when it comes to credit card spending.

The Don'ts

  • Don't think your interest rate will stay the same. Often cards come with an introductory interest rate as low as 0%. However, after 3 months the interest rate can increase dramatically, leaving you with a nasty surprise and more debt than you anticipated.
  • Don't rely on a rewards program. Many cards will come with airline miles or rewards for specific types of services. However, often these perks are difficult to redeem. Cards that have fewer programs and cost less per year (even zero) might save you money over the long run.
  • Don't make minimum payments. This option makes paying off your debt take much longer. The more money on your account, and the longer you take to pay it, the more interest you have to pay.
  • Don't get a cash advance. Sometimes credit cards allow you to get cash from your card. However, when you do so, the interest rate is much higher than using the card itself.
  • Don't apply for pre-approved credit cards. Credit cards sent through the mail are often merely credit card applications. However, when that application is processed, it can actually hurt your credit score.

The Dos

  • Do understand the terms of the agreement. By understanding the full credit card agreement, you can avoid making mistakes that hurt your credit score. You can also make full use of the benefits on your card if you read the fine print.
  • Do keep your balance low. The lower the balance, the less money you have to pay in interest. Plus, a low balance helps build your credit score. If a balance gets above 30% of your total credit limit, it can hurt your credit score.
  • Do make weekly payments. Making weekly payments helps keep your balance low and builds a habit of managing credit card debt. Plus, if you pay off purchases within the first few days, then no interest is charged on the card. Regular payments also help boost your credit score.
  • Do check your spending. Track what you spend the most money on, and set up budgets to regulate it. If your card does have a reward program, you can see if it is working for you, or you can change your habits to increase your rewards.

Managing your credit can open opportunities in the future and help you enjoy the full benefits of financial freedom. To find out more on good financial practices, or if you need help with financial problems, visit our blog.

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