Common Mistakes for First-Time Credit Card Customers

by | Feb 17, 2022 | Billsaver, Understanding Credit Cards

Receiving a credit card is a major first step in your financial life, but it can also take you down a road of debt if you do not use your card responsibly. Often, people believe that only the young get into financial trouble with credit cards, but the truth is you are likely to make a mistake at any age. We have put together this guide of common problems first-time card holders will face.

Ignoring Your Account

Even if you are not using your credit card, you need to monitor activity on the account so you can detect fraudulent activity as soon as it appears. You do not have to check your account every day, but you should aim to get online and check your account every week. If you notice any charges you did not make, report them to your credit card issuer immediately.

When you are using your card, monitor your account to track the amount of money you are spending. It is also a good idea to keep a separate log of your spending, just as you would with your checking account. Another good idea is to set up text or email alerts with your card issuer that will tell you when you are nearing your credit limit.

Failing to Create a Payback Plan

Do not spend money on your card unless you have a realistic plan for paying back the money. Many people end up in debt because they use their card frivolously and do not consider how they will pay back the debt. You want to pay off your credit card balance as soon as possible so that you are not incurring interest fees.

Not Sticking to a Plan

Another problem that can get first time card holders into trouble is not sticking to their payback plan. For example, you may charge $500 on your account and plan to pay $50 each week until it is paid off. However, if you only make a payment every other week, you will double your payback time, which will increase the interest you owe on the card. Thus, if you make a plan to pay off your credit card, it is very important to stick with it. Make cuts where you can and force yourself to save so you can pay off the card to protect your credit score and decrease your debt level.

Paying Only the Minimums

Each month, your card issuer will require you to make a minimum payment, unless you have a zero balance. However, this minimum payment is not enough to pay off your debt. In fact, making only the minimum payments will keep you in debt for years. You need to pay as much as you can each month toward your credit card balance so that you can get out of debt quickly.

Not Using the Card

Because people are afraid of accumulating debt, many card holders choose not to use their card at all. However, try to pay for a transaction using your card at least once a month, as it will help increase your credit score. As long as you have a plan for paying your balance each month, you should not have any issues. Just make sure you know how much your payments are and when they are due so there are no surprises.

Not Checking Your Credit Report

Once you have a credit card, you will also want to get a free copy of your credit report once a year. This way, if someone opens an account in your name without permission, you will find out. It will also show you all of your outstanding debts and reveal any issues you may be having. AnnualCreditReport.com will give you access to a free copy of your credit report once a year from each of the three major credit bureaus.

Also, when reviewing your credit report, remember it may take 30 to 60 days for the change to show up. For example, if you pay off a debt in March, it may still be on your report in April. Feel free to contact your card issuer to make sure they see your account is paid, but otherwise, you will need to be patient and wait for the changes to appear.