Money Management: Are You Ready For Your First Credit Card?
Posted By tsauthor on February 25, 2011
In our society, receiving a credit card is thought of as being a natural step in learning to manage your money. The majority of people know that receiving a credit card is important; your credit habits with a card will establish a financial foundation that will influence the way lenders see you. It is important to realize that credit cards aren?t for everyone. New credit rules in the U.S. require that you get a co-signer if you are under 21 and unemployed. Even if you have turned 21, you might not be prepared for a credit card. Before getting a credit card, it is vital that you honestly evaluate your finances, and your habits. You should know that you are ready for your first credit card.
Problems Arising from Credit Card Use
The biggest issue with receiving your first credit card application before you are adequately prepared is that you might lose track of how much debt you are accumulating. Credit card use can be almost addictive. You believe you can buy nearly anything. The minimum payments on credit cards are so low that you might actually believe that you can afford to purchase an item you would never buy if you had to pay from your checking account.
Because so many first time credit card users are students, and youth is often associated with impulsive behavior, it comes as no shock when impulse buying begins to add up and debt grows. For some young people, getting a credit card too early leads to a cycle of debt. No matter if you have the best credit card offer in Canada, you could wind up in too much credit card debt. Unless you make sure that you are truly ready for your first credit card, you could find yourself in a dangerous financial situation.
How to Tell If You?re Ready for a Credit Card
You need financial discipline if you are going to use a credit card responsibly and avoid the pitfalls associated with credit card debt. Here are some financial habits to develop now, to help you prepare for your first credit card:
? Be able to make a budget or spending plan and stick with it.
? Understand the importance of saving. Start an emergency fund and set money aside each month for retirement or other money goals.
? Create financial and spending goals. Get in the habit of saving up for large purchases. This way, when you do use a credit card, you can pay the balance immediately.
? Be aware that credit cards are not reflections of money you already have. Credit cards are loans that you have to repay with interest.
? Practice with plastic by using a debit card responsibly. Track you spending and avoid overdrawing your checking account.
? Stay away from debt as much as you can. When you do have to borrow (for an education, car, etc.), get as little as possible.
? Choose to pay down debt you do have as quickly as possible.
As you practice controlling your spending, and as you keep track of what you use your debit card, you are showing that you might be prepared for your first credit card. Once you have your card, though, you need to continue your good habits. In order to avoid credit pitfalls, you need to pay off your balance each month, and control your spending so that you don?t charge more on your card than you can pay off. A good idea is to begin with a student credit card or a card with a low limit.
Before you apply for your application for your credit card, get some practice with budgeting. Personal finance software and web applications can help you understand budgeting while teaching you to track your spending. A certain comfort level with budgeting and other aspects of financial planning is necessary for wise credit card use.
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