I signed up for my first credit card at the end of my freshman year of college. The first couple of years of credit card ownership were rough, and my credit and I took some licks in the process (and my pride for that matter as I had to petition my parents for bailouts on two separate occasions). But eventually I learned my lessons and got the hang of it. In an effort to spare you from the mistakes I made, here’s a snapshot of what I learned:
Credit requires cash flow
When I signed up for my first credit card the summer of my freshman year of college, I was about to start an internship with long hours and no pay. Signing up for a credit card seemed to be the only way of maintaining my high-class lifestyle of eating food and sleeping indoors. So I marched over to my bank and received a plain grey student card that boasted a low applied interest rate, as well as a $2,000 limit. Fast forward 7 weeks to a desperate young man petitioning his parents for money, which brings us to lesson number one: using plastic requires paper. Credit cards require cash flow. Ideally, you should be paying off your bill in its entirety at the end of each billing period. Short of that, you need to pay at least double the minimum payment. Do not make my mistake (unless you’re fond of disappointed looks from you parents coupled with Herculean amounts of yard work).
Small purchases add up quick
It’s important to note that my credit card-tastrophe wasn’t caused by the purchase of flat screens and champagne fountains. Rather, my high balance was the result of a combination of smaller purchases. A sandwich here, a candy bar there – these things add up a lot quicker than you might think, so it’s important to keep track of them.
Get the app
Don’t wait until the end of the month to get womped by an unexpectedly high bill. Credit card companies have done us a huge solid by creating free applications that allow us to monitor our spending and make payments anytime, anywhere. I personally check my finances several times a day and make payments at least twice a month (one for each paycheck).
Be wary of recurring payments
While I may be financially responsible and credit card savvy today, I spent the first half of my twenties living paycheck to paycheck as a starving artist. One day my card was declined while attempting to buy a $2.50 subway ticket. This caused a great deal of brow furrowing, as I had checked my account the night before and had seen a $20 available balance. I consulted my online account: $2.01. Wait, what? How did this happen?? And there it was: $17.99 to Blizzard Entertainment (a.k.a. World of Warcraft); this was a recurring monthly fee to play. Even though I hadn’t been playing the game for some time, I had forgotten to cancel the recurring subscription. This resulted in a declined payment and, ultimately, an impromptu three-mile jog to work. Moral of the story: Keep a close eye on all your recurring payments. I’d recommend marking the payment dates and amounts on your calendar.
What lessons did you learn from your first credit card experience?