Credit cards require responsibility. You need to be able to make all of your payments on time, reduce temptation to overspend, and keep yourself from falling into debt. That responsibility is one of the main reasons that no one under the age of 18 is allowed to get a credit card – there is serious concern that young people are both irresponsible, and will not have enough money to pay it back.
When you turn 18, however, you are immediately allowed to apply for a credit card – but should you? When is the best time to get your first credit card?
Get Your First Credit Card
Provided you have some way of making your payments, you should get your first credit card as soon as possible after you turn 18. While credit cards do run the risk of causing you to fall into debt, they also help you build up a credit history. That credit history will help you get lower interest loans, better interest rates, and have other benefits that may help you in the future.
The sooner you start to build your credit score, the better it is for your long term outlook. Someday you will also be buying a car or getting school loans and a good credit score can make the interest rates on all of those loans much lower.
Experts recommend that you keep no more than two credit cards at a time, and that you change your credit card as infrequently as possible. Every time you change your credit card you may risk lowering your credit score.
There are many reasons why you may want to change your credit card and replace an old card with a new, better credit card. Here are several reasons it may be a good time to change your credit card.
When to Change Credit Cards
Raised/High Interest Rates
If you have or will have a high interest rate on your credit card, yet your current credit score is much higher than it was previously, it may be a good time to switch. Some people get credit cards when they have bad credit, only to build their credit later. Others have great credit, but the credit card company started to increase their interest. Either way, switching to a low interest card can be beneficial.
New Bank
It’s not uncommon to have a credit card associated with your bank. If you switch banks, suddenly the card has lost its convenience value, and you may find that there are several better credit card options available. Bank credit cards tend to have the fewest options but the most convenience provided you are a member of their bank.
One of the greatest fears that many credit card users have these days is the idea of their card getting stolen. Identity theft is everywhere, and while there are many precautions in place to reduce the effects of a stolen credit card, it can still be a traumatic, difficult experience that most people hope to avoid.
How Do Credit Cards Get Stolen?
Not long ago, the only way you could take a credit card was if someone left it out in the open. Nowadays, however, credit card information is becoming much easier to not only steal, but also use. You can have your information stolen simply by having someone look at your card, write down the numbers, and use that information to buy things online. You can also have it stolen if a website you used gets hacked, or was run by someone that didn’t input the security codes correctly.
Whatever the method, stealing a credit card has become easier. Thankfully, a number of credit card companies have put safeguards in place so that your life will not be turned upside down by a stolen card.
After It Gets Stolen
These days, it is usually the credit card company – not the individual card owner – that is able to spot unwanted charges.
When it comes to lenders, your credit is determined primarily by your credit score. Your credit score represents a “risk profile” – in other words, it tells lenders and credit card companies how much of a risk it would be to give you credit.
Credit companies take that number and decide on loan amounts, credit lines, and interest rates depending on where you rate. When your credit score is higher, your interest rate will be lower, because companies want to entice you to use their services. When your credit score is lower, your interest rate will be higher, because credit companies want to be reimbursed for the risk they have in taking you on as a borrower.
Understanding Credit Scores
Reading your credit score accurately is important, especially when you are considering a credit card or a loan. By understanding what your credit score means, you will be able to:
Know if you need to improve it, so you can take the necessary steps.
Make sure they are accurate based on what you know about your credit history.
Ensure that you are getting the right type of rate for your score.
For example, if you have a great credit score, but are offered a high interest loan, you may be able to find a better rate elsewhere.
Managing your finances is an important part of living a stress free lifestyle. Money – or, more specifically, improper use of your money – is one of the leading causes of personal and relationship stress, and small personal finance mistakes now can lead to long term financial problems later.
Managing your finances correctly should always be part of your long term plan. Here are five common personal finance mistakes that you need to avoid if you hope to experience less financial stress in the future.
Personal Finance Mistakes
Signing Up For Store Credit Cards
You hear it in almost every clothing store. “Would you like to sign up for an in store card and save $10?” The answer should be no. In store credit cards are still credit cards. They have interest rates that can easily cause you to pay more over the long term than you saved by signing up for the card, and store credit cards will negatively affect your credit score, which will have you paying more for loans and credit cards in the future.
Not Putting Money Into Savings
The problem with budgeting is not that people can’t keep within their budget – it’s that you can’t assume that you can keep within your budget 100% of the time.
Credit cards are designed to provide you with a way to pay for items or services without having to use your cash. They are a useful way to make sure that you always have money on hand for what you need. Sometimes it is also useful to ensure that you have more credit available in case of an emergency or a large purchase.
You only want to carry one or two credit cards at a time. Yet this can have its limitations – especially if your available credit is lower than the cost of the items you wish to buy. Rather than get a new credit card (which could negatively affect your credit score) here are some ways for you to increase your available credit.
Ways to Increase Available Credit
Replace Your Card
Sometimes the card company that you use limits the amount of credit they are willing to provide. When this happens it may be time to replace your credit card with a new credit card that provides you with a higher balance. You will want to transfer your balance over completely to the new card and cancel the old credit card to reduce its impact on your credit score.
Increase Your Credit Score
Credit card companies are constantly evaluating and reevaluating your credit risk based on your then-current credit score.
It’s not uncommon to use a credit card when traveling. It can be dangerous to carry cash on you and difficult to carry the right amount of cash in countries that only accept foreign currency. Using your credit card is a useful way to both avoid any math and help yourself stay safe.
Yet it can also be risky. Many people take advantage of tourists, knowing that you probably will not be coming back to the state or country to confront them. It’s not hard to steal your credit card and make you deal with the consequences. Traveling with a credit card is useful, but you still need to follow these 6 helpful tips.
Credit Card Traveling Tips
Bring One Card
Ideally you should only have one card with you and leave the rest at home. This will limit the amount of damage that someone can do if they get ahold of your wallet. You may still need another form of payment in case of an emergency, and your card should have a lot of credit left in case you need to use it (so you do not go over your limit), but holding onto only one card is a useful way to keep yourself safe.
Check Your Balance Regularly
Before, during, and after your trip, check to make sure your card balance is exactly what you expect it to be.
No matter how well you budget, it’s not uncommon to find that it’s tough to make a credit card payment. Even the best budget can’t control for all events that require some type of financial investment, and occasionally you may find that it’s difficult to pay your credit card when your budget is tight.
Credit cards, as a rule, serve two main purposes:
They can be carried in lieu of cash (since credit cards are safer to carry with you).
They can be used when cash is tight in order to pay for something you need.
When you find it may be tough to pay off a credit card bill, it would seem that your needs fall under that second category – using a credit card to pay off something of need. This, however, leads to two questions:
Is it possible to use one credit card to cover the payment of another?
Is this a good idea?
Can You Pay One Credit Card With Another
The answer to the first question is absolutely. Some credit cards have options that allow you to use the card to make a payment, while others have a cash advance option that you can use to make the payment for you. You may need to do it in two separate transactions – taking out the cash advance, and then making the deposit on the other credit card.
Credit cards are an extremely valuable financial tool. They help you manage your finances better, provide you with rewards, and can be used when you need immediate funds and don’t have the cash on hand. Without credit cards, many people would find themselves unable to pay for the things they need.
Yet credit cards can also be used incorrectly, and when they are, it can cause financial problems. Credit cards will always be a useful tool, but if only if you avoid these very common mistakes.
Credit Card Mistakes
Getting Too Many Cards
More than two credit cards can affect your credit score. But beyond that, too many credit cards makes it easy to lose track of when to make a payment. One missed payment can affect your credit score, your finances, and your ability to continue to cover payments in the future.
Using Cash Advance
Cash advance on a credit card may seem like a good idea, but it is the least useful tool available for managing your finances. It costs a considerable amount of money, it can lead to further debt, and it is one of the hardest things to plan for financially.
Using it Like Cash
Getting a credit card with a 5000 dollar limit does not mean that you suddenly have 5000 more dollars.
