Young credit cardholders increased in numbers dramatically pre-recession but it has been announced by credit experts that many young people fail to grasp the basic credit management rules that they require to organize their finances correctly. When we face such tough economic times, every tip that we can use to help aid our financial situation is paramount – especially for young people. So here is my list of 7 Essential Credit Management Rules for Young Credit Card Holders that should help you out.
1. Buy What You Can Afford
The first rule of having a credit card is that you must be able to pay off what you borrow every month. This means that if you can only afford to pay off $100 a month, only borrow a total of $100 in the entire month. If you fail to pay back the money, you will find yourself paying back interest.
If you know that you will not have enough money to pay off your balance at the end of the month, look into opening up 0% interest credit cards or cards with a free overdraft facility. Although you should never depend on credit cards to help you through your financial life, they can be a good aid for young people.
2. Pay off as Much as You Can
One of the credit management rules that you should really stick to is paying back your credit as quickly as possible. Although credit cards will offer you a ‘minimum amount due’ on your monthly statement, you should always try and pay off the highest amount you can possibly afford each month, which will mean that you pay off your debt faster and do not accumulate any interest. If you only ever pay back the minimum amount due then you will find your credit rating becoming very poor, leaving you unable to borrow any credit (at least at a low interest rate) in the future.
3. Do Not Apply for Too Many Cards
Becoming overwhelmed by the amount of credit cards you have is very easy. To stop yourself from struggling to keep up to date with which cards you are using and how much you owe on each card, limit the number of credit cards you have. Although it’s always good to have multiple cards due to the different benefits that they will provide (more cashback, free overdrafts, 0% balance transfers) you should always be responsible.
4. Avoid Cash Withdrawals from a Credit Card
Using ATMs to withdraw cash from a credit card can become very expensive, with various credit providers charging fees for cash advances along with interest. The interest is usually charged at the date of withdrawal instead of at the end of the month, leaving you with even less cash at the end of the month. This is one of the credit management rules that you should always bear in mind when budgeting.
5. Exercise Caution with Using Your Cards Abroad
For students or young people that are going to travel abroad and use their card it is very important to make sure that the terms and conditions of your credit card are clear. If you are unprepared and do not take notice of the terms, you may find yourself having to pay large fees for making transactions in other countries.Students often have the option to use prepaid credit or debit cards when abroad, which will limit the fees you are charged.
6. Consider How Much You Are Spending
A credit management rule that should be observed by people of all ages is to understand how much you are spending when using a credit card. It is far too easy to simply make purchases on a card without considering the cost of the purchase – you could easily find yourself spiraling out of control with spending very easily.
7. Don’t Be Afraid to Ask for Advice
Everyone finds themselves without the means of paying back the debt that they have accumulated sometime in their life. You should never be afraid to ask advice from someone – whether it’s your parents, friends or a bank worker, there are always options. Worrying about your debt is not a good thing, but can help you to get back on track with spending.
That is my list of 7 Essential Credit Management Rules for Young Credit Card Holders complete. I hope that you have found it helpful, and indeed I urge you to leave a comment to share any other credit management rules that you may think will help others.
Top Photo Credit: demosphere