Don't Make These Common Credit Card Missteps

• Author: Jacob Greene
• Posted: 2024-11-02

Many people know that using a credit card is a viable route to improving your credit score. It also gives you the means to make purchase decisions that would be otherwise out of your financial grasp.

However, there are obvious risks to credit cards along with these advantages - as well as some dangers that even the savviest of credit card users might not be aware of. Here are some of the most important things you should be aware of, whether this is your first foray into the world of credit cards or if you've had one in your wallet for years and make regular use of it.

What's Good About Using a Credit Card?

There are numerous benefits to credit cards. One of the major reasons why many people prefer to use them for all payments is that it is a safer way to pay than cash. It's simple and quick to have a card canceled in the event that it's stolen, and you have a much better chance of getting your money back if you were the victim of fraud.

New Credit Card Users Have to Stay in Their Lane

If you're someone who hasn't spent much time in the credit game, one thing you should definitely know is that the credit card companies hailing themselves as the best aren't necessarily the best for newcomers. The good news is you almost certainly won't qualify for these cards anyway. Although these big-name credit card companies offer the best deals, perks, and rewards - bonuses for signing up and long periods without any interest just to name a couple - they also have strict requirements when it comes to income and credit history.

It's best to look into card options geared more towards beginners. For those who are going to school, for instance, there are student credit cards. These have been designed specifically with the needs of the college lifestyle in mind, helping students pay for books, meals, and school fees.

Secured credit cards are ones that require a cash deposit. This is the solution for many people who have been turned down by all the other credit card companies because they don't have any credit history to speak of. Your security deposit usually determines your credit limit, and the minimum deposit is generally somewhere around $300.

As long as your credit score falls somewhere between 630 and 690 - a "fair" credit score by most standards - you will be able to find no shortage of credit card options marketed to you. In other cases, you can talk to your bank, credit union, or search online to find a credit card option that you can pre-qualify for.

When to Avoid Credit Cards

If you are the type of person who has a hard time managing your finances as it is, adding a credit card to the mix might not be the most advisable solution. Sometimes the temptation to overspend or the burden of trying to manage your payments might outweigh the potential benefits of this setup.

But with caution, it is possible to safely and responsibly try out a credit card even if you're shaky on the idea of it. The key is to start small and build your way up, allowing for the lowest possible amount of financial risk. Once you're comfortable with the process and confident that you'll be able to keep up with payments, you can consider increasing the stakes a bit.

You can try selecting a card with the lowest possible limit, meaning that charges will be cut off after a certain point. This eliminates the danger of going on a spending spree and building up a debt for yourself that you'll never be able to pay back. Once you're caught in a cycle of trying to keep up with the interest rates of the previous month's balance you haven't paid off yet, it's all too easy to go into what's known as a debt spiral.

If You're Still Having Trouble

Even if you have a general idea of how a credit card works, it's well worth it to take a deeper dive - because the details may get a little thorny if you're not careful. Handling a credit card responsibly is crucial for your financial well-being, but not everyone knows exactly how this is done.

You'll save yourself money by doing research ahead of time - and that's to say nothing of the time and headache caused by making these common credit card missteps.