If you’re new to using credit cards, you’re in for a pleasant surprise. That mostly coveted plastic card provides plenty of opportunities to rack up rewards. But there are also a few things you need to be aware of before indulging yourself with a new pair of kicks or the latest iPhone model.
A credit card, if you use it wisely, can help you build good credit history. So here are ten handy tips for first-time credit cardholders that will help you maximize your card, whether it’s a rewards card, cashback credit card, or air miles card. Let’s get started.
- Get to know your credit card agreement
- Pay your balance in full every month
- Check your statements carefully
- Use mobile apps to track your progress
- Take advantage of sign-up bonuses, rewards programs, and other incentives
- Request an annual fee waiver
- Activate OTP and apply an additional layer of security
- Avoid cash advance and balance transfer fees
- Keep your credit utilization low
- Don’t be afraid to ask questions
1. Get to know your credit card agreement
The terms and conditions are the legal agreement between the cardholder and the credit card company. They outline the rights and responsibilities of both parties, as well as the rules for using a credit card.
If your bank offers a free installment credit card, ensure you read the fine print. Most installment cards will automatically convert big-ticket purchases and charge you with an add-on rate. You might be surprised with your monthly payment after buying items.
2. Pay your balance in full every month
When you first get a credit card, you might be tempted to make the minimum monthly payment. However, this is a trap that you should avoid.
Credit card companies typically charge a 2.00% interest rate on outstanding balances, which means you could pay hundreds or even thousands of pesos in interest if you only make the minimum payment each month for a few months.
This can become a bad habit on your end as you pay for the interest charge if you keep on paying the minimum. That said, keep paying the total amount due, and you can build a credit score effortlessly.
3. Check your statements carefully
Most credit card providers offer the statement of account (SOA) via email or mail. You can check the charges anytime if you have quick access via email. If there are any unauthorized charges or fraudulent transactions, it is crucial to file a dispute as soon as possible.
Always keep track of spending to stay within one’s credit limit. If the credit card balance is not paid in full each month, interest will be charged on the outstanding balance. Moreover, if you exceed your credit limit, you will also be charged an overlimit fee.
4. Use mobile apps to track your progress
Credit cards can be a great way to build credit and establish a financial history, but they can also quickly rack up debt. For first-time credit cardholders in the Philippines, it is essential to use mobile apps to track your progress and avoid getting in over your head.
Personal finance apps like Wallet Money, Money Manager, and Monefy can help you keep track of your spending. It is easy to swipe your card without considering how much you spend. But seeing your purchases totaled up at the end of the month can be a reality check. It helps you stay on budget and avoid overspending.
5. Take advantage of sign-up bonuses, rewards programs, and other incentives
Any savvy shopper knows that a little bit of planning can go a long way in saving money. The same is true when it comes to using credit cards.
Sign-up bonuses, rewards programs, and other incentives can help you get the most bang for your buck. Credit card companies typically offer sign-up bonuses as an incentive for new customers. These bonuses can be in the form of waived annual fees, cashback, rewards points, or air miles.
Rewards programs allow cardholders to earn points and redeem them in exchange for merchandise, gift cards, or travel expenses. Meanwhile, other credit card companies offer special incentives like free gadgets for every successful referral on a credit card application.
6. Request an annual fee waiver
A first-time credit cardholder should request an annual fee waiver to avoid paying the yearly fee associated with owning a credit card. Many credit card companies will waive the annual fee for first-time cardholders as part of their promotions.
This is because the company wants to encourage new customers and keep them happy with their service. Additionally, many cardholders are not aware that they can negotiate with their credit card company to have the annual fee waived. Asking for a waiver is a simple and effective way to save money on your credit card expenses.
Even if your credit card company does not normally offer waivers, it is still worth asking for one. The worst they can say is no, and you may be surprised at how receptive they are to your request.
7. Activate OTP and apply an additional layer of security
Always take extra steps to protect your credit card information. One way to do this is by activating OTP, or one-time password, for your credit card. OTP is an additional security layer required for certain online transactions.
When you activate OTP, you will receive a text message with a unique code that you will need to enter to complete your transaction. This code can only be used once and expires after a few minutes, so it’s much more difficult for someone to steal your credit card information if they don’t have your phone.
8. Avoid cash advance and balance transfer fees
There are a few reasons why you should avoid using cash advances and balance transfers. These types of transactions have high fees. If you’re doing a balance transfer, you’ll likely have to pay the add-on rate of 1%, depending on the issuer’s interest rate.
It’s crucial to remember that your credit card issuer may limit how much you can borrow via a cash advance or balance transfer. So if you need to borrow a large amount of money, you may be unable to do so using one of these methods.
For these reasons, it’s generally best to avoid using cash advances and balance transfers whenever possible. If you need to use one of these methods, understand the fees and interest rates involved to make the best decision for your situation.
9. Keep your credit utilization low
It’s better to keep your credit utilization low if you’re a new credit cardholder. This means you should not use more than 30% of your credit limit. For example, if your credit limit is ₱100,000, you should only spend ₱30,000 or less per month. This will help you keep your debt-to-income ratio low and avoid hurting your credit score.
One way to ensure you don’t exceed your credit limit is to set up automatic payments for your bills. This way, you will never have to worry about missing a payment or being charged interest.
10. Don’t be afraid to ask questions
Lastly, it’s important to understand how to use and manage your card properly. One of the best ways to do this is to ask questions and call customer support when you need help. Customer support can help you understand your statement and resolve billing disputes.
Even if you’re not sure what question to ask, they can point you in the right direction. If you’re ever in doubt about whether or not to call customer support, err on the side of caution. It’s always better to get clarification than to make a mistake that could cost you money.
Credit cards can be handy tools for both personal and business finances. When used responsibly, they can help you build your credit score, earn rewards, and make the occasional large purchase without having to worry about saving up for it.
We hope our tips will help you get started with using a credit card in a way that’s comfortable for you and that you find helpful and rewarding.