If you’re new to the credit card game, you’re probably familiar with some of the terms and I’m sure that you’re familiar with the rewards credit cards have to offer. The thing is if you don’t use your credit card properly, you’re not going to have the rewards work for you. If you think you’re not going to get rewards because you’re a student and it’s your first credit card, you’re wrong.
The first thing you want to do when you get your first credit card is to make sure you don’t treat it like a piece of plastic. You’re going to want to keep track of all of your expenses to make sure that you can pay off your bill in full. If you fail to pay your bill off in full, you’re not going to make the rewards work for you. I’ll explain why.
Let’s say you apply for a credit card and you have a fifteen percent APR (annual percentage rate). This is the rate that will be charged to your bill that’s unpaid. If you have a one hundred dollar bill and you only pay fifty. That extra fifty is going to get hit with the interest rate charge. If your credit card has rewards and let’s say it’s a point based system, you probably received 100 points. If you’re paying that fifteen percent on the fifty dollars, that’s $7.50 over the year. If your points are like Citi Bank, it usually takes about five thousand points to get ten dollars. As you can see by this scenario, your rewards won’t work for you.
Discipline is the key
If you know you don’t have self discipline or you don’t think you know, try and apply for a card and use it for about three months. After the three months are up, look back at how you spend your money. Did you pay off your bill on time each month? If not, how much was left over? Even if you had a few dollars left over that you didn’t pay, I hate to admit it but a credit card isn’t for you. The rule to life is to buy things you can afford. If you go into the grocery store with five dollar cash, are you going to walk out with a ten dollar pack of soda? I don’t think so. You have to use the same concept when it comes to credit cards.
By now, I’m hoping that you realize that it’ll take some self discipline and motivation to pay off your bill on time each month. If you fail to do so, you’ll find that your rewards won’t work for you. Credit cards can work wonders and don’t let the people who don’t know how to use them tell you that they’re bad. Let your own mind and self make the judgment and If you find credit cards aren’t meant for you, simply stay away.