A Must Checklist for First Time Credit Card User

Are you getting your first Credit Card? The feeling must be very empowering and elating. You might already be thinking about all the extra reward points and discounts that you can get on online shopping websites. Yes, you can impress your friends by brandishing your card when they are still fiddling around with cash!

This is precisely what it looks like, easy money, but is it? Always keep in mind that a Credit Card is a tool to simplify making payments and build a Credit Score. You should not go on a spending spree to buy everything that catches your fancy.

Also read: Top 10 Credit Cards in India

Here is a handy checklist for anyone who is a first-time Credit Card user.

1. Pay Credit Card dues in full and on time.

This is the basic and most important rule of Credit Cards. Do not use a Credit Card as a debt instrument but only as a payment mode. Consider it as a kind of cash replacement, not as a way to get easy money. Always keep in mind that you should spend only as much as you can pay at the end of the month and no more. The Credit Card interest rate is much higher than almost any other loan that you can get it is best used only when you have the money to pay at the end of the credit cycle.

2. Keep track of your card limit and card cycle.

Always check your Credit Card available limit after every transaction. If you have not made any spending in a given week, still check your available credit limit every Sunday. It does not take more than a few minutes and will help you keep an eye on your Credit Card usage patterns and identify if there has been any anomaly in the unbilled charges on your card. Similarly, keep a check on when your Credit Cycle ends. Try to make larger spends towards the beginning of your credit cycle so as to get the most extended interest-free period.

3. Do not ever use your Credit Card to withdraw money

A Credit Card is meant for cashless transactions. It does allow you the feature to withdraw cash, but the interest and charges related to Credit Card cash withdrawals are extremely high. All the savings you would have done in painstakingly disciplined use of Credit Card over many years will be wiped out if you take even a very small amount of cash from a Credit Card.

4. Choose the card based on your spending pattern.

Almost all Credit Card issuers have different card products. Choose if you need a Rewards Card, a Fuel Card, or a Travel Card. Citibank Rewards Credit Card offers one of the best rewards program, but if you are not looking into rewards but instant savings, you should choose a cashback card like Citibank Cashback Credit Card.

5. Choose a lifetime free Credit Card as your first card.

When you are learning the Credit Card basics, it is important to have a card with the minimum number of commitments possible. The best approach is to start with a lifetime free Credit Card because the level of spends you will be making on the card does not justify that you pay any fee for the card.

Besides, if you decide you want to keep Credit Cards as an emergency backup and not a regular payment instrument, you can rely on the card not being a drain on your wallet when you can spend your money elsewhere.

6. Do not jump on card upgrades or limit increases.

Once you have used the card for the first year with no defaults, the bank will be keen to offer your limit increase or a card upgrade. It is best to avoid taking card limit increase for the first 2-3 years unless you have received a significant income boost. Also, be mindful of the card upgrades. Not many people realize that when they upgrade their card, they may lose some features and also have to start paying entry and annual charges. Check with the bank about all of these before you sign up for a Credit Card upgrade.

7. Read MITC booklet that comes with your Credit Card.

This may seem like a long boring set of unintelligible legalese, but it is very important to read the Most Important Terms & Conditions (MITC) document that comes with your card. Please be aware that it covers almost all conditions about your relationship with the Credit Card provider, what will be the charges and interest rates, and what will be the conditions for rewards redemption.

8. Keep some money for emergency.

The best approach with Credit Card usage is to keep money equal to your credit limit in a Fixed Deposit. This will serve as an emergency backup in case you have any funding problem while you have already used the available limit on your Credit Card.

This emergency fund will allow you to clear your current dues, and you can avoid using your Credit Card while you get your financial situation under control.

9. Never share your Credit Card details with anyone.

The details of your Credit Card like card number, CVV, validity, etc. are sensitive information that can be used to make spends on your card without your knowledge or consent. While most cards come with fraud and buyer protection, it is best that you keep your card details to yourself and not share them with anyone. Also, inform your family members never to reveal your card information to anyone.

Also Read: ICICI Bank Shares Link to Opt for July Moratorium

Always keep in mind that the best thing with Credit Cards is that they are a tremendous financial learning and credit usage instrument, but only as long as you can cover all your liabilities on schedule. Even a small mistake will completely upset the cart, and you will be very hard-pressed to balance it back. The Credit Card usage mantra is simple – spend only as much as you can pay back at the end of the month.

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