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Credit card strategies for beginners

There’s no need to be nervous about using your first credit card, as long as you think before you spend.

30 November 2017Hannah Salih 6 min read

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As the owner of a freshly pressed credit card, you’ll probably fall into one of two camps. You’ll either think it’s the best thing since sliced bread and you'll be putting everything on it, or, having readily-available credit will make you nervous. In which case your card will probably spend most of its life gathering dust in a desk drawer.

But, as always, it’s about balance. Yes, credit card debt can get the best of you if you’re not careful. On the other hand, it can really open doors - you can spread the costs of your purchases and build up your credit score at the same time.

Of course, your card will only ever help you improve your financial wellbeing if you use it wisely. How do you do this you ask? Well, it just so happens we've put together some tips on how to master your very first credit card.

Pace yourself

It's tempting with your first card to put everything on it and worry about the bill later. So a good idea is to spend slowly and start from there. Dip your toe in by using your card for a small, regular expense first, such as your gym membership or a monthly travelcard. Then make sure you pay off your card on time and in full

The idea is to get into the habit of using your credit card regularly and responsibly. By doing this, you will start to build up a good credit history - demonstrating that you can handle credit and be relied upon to pay it back, which is exactly what lenders are looking to see. In time, this should have a positive effect on your credit score.

And once you’re comfortable, you’ll be better prepared to handle larger purchases. If you think your credit limit is too tempting, you can ask your credit card provider to lower it.

Keep track as you go, not just when you get your bill

Without being able to watch your balance go down as you spend, it can be easy to lose track of your growing credit card bill. This is especially easy to do when it doesn’t feel like your money. To keep on top of this, here are some tips:

  • If you have a monthly budget, make sure your credit card is included. Start off by planning for the amount you want to spend on your card each month and put that into your budget. If you stick to the amount you set out beforehand, you shouldn’t get caught out.

  • If your credit card company has an app (which most big lenders do these days) download it, and register. This way you can keep an eye on your spending just like your regular online banking.

  • The bottom line with any credit card is to stay within your credit limit. So before you start spending, make sure you're completely clear on what your limit is. If you go over, you could get charged a fee and it may affect your credit score.

Try to pay off your balance in full

Ideally, you should only spend on your card what you can afford to pay off in full at the end of the month. Providing you pay your full balance on time, you shouldn't have to pay any interest at all on the card.

By contrast, if you only pay the minimum amount, or anything less than the full balance each month, you’ll pay interest on the remaining amount. This could get expensive quickly – especially on your first credit card, which could come with a high interest rate.

The minimum payment is usually a set amount (e.g. £20) or 1% of your total balance, whichever is higher.

The only exception to this rule is if you have a 0% interest offer on your card. If this is the case, you'll usually only need to pay the minimum amount each month to avoid interest charges.

If you make no payment at all on your card, or you pay after the bill is due, you may get hit with late or missed payment fees. This will also show up on your credit report, and could damage your credit score, particularly if you do it regularly.

Foolproof your payments

Make sure you never miss a payment on your card by setting up a direct debit. When you set this up you can select the ‘full statement balance’ option. That way, it’ll always collect the full amount you owe and you won’t have to worry about accidentally accruing any interest or charges.

If you do decide to set up a direct debit, you should still check your credit card statements thoroughly. Not only can you monitor your spending but, crucially, you can make sure there are no incorrect or unusual charges on your account.

Try to check your balance throughout the month, not just when when your bill is due. This can help you stay on top of your purchases and make sure you're well within your credit limit.

Stick to one credit card, at least to begin with

If you’ve never had credit before, it’s unlikely that you’ll get a credit card on attractive terms, at least to start with. Your first credit card will probably have a relatively high interest rate and a small credit limit. Which means your card will be better for spending small amounts and paying it back on time - but not great for spreading the cost of big purchases.

So once you get comfortable with your first card, you may be tempted to apply for others with better terms. However, there are a couple of reasons not to do this straight away.

  • You need time to build up a good credit history. If you apply for another credit card immediately, you may find that you're offered another the same or similar terms. The best way to see if your credit history has improved is to check out your credit score.

  • Credit applications leave a mark on your credit report called a hard search. Collecting several hard searches in a short period can make you appear desperate for credit, even if it isn’t true. This could damage your credit score and make it less likely that you’ll be accepted for a better credit card — the exact opposite of what you’re trying to achieve.

Once you’re ready for your next card, use an eligibility check first (also called a ‘soft search’) – which is a preliminary credit check that will tell you if you’re likely to be accepted for a card. It won’t affect your credit score, and will help you target any future applications so you can avoid a being rejected. (You can check your eligibility for cards on the Offers page of your ClearScore.)

Keep your credit utilisation low

Credit utilisation is how much of your credit limit you’re using. Lenders will look at this information when carrying out a credit check, and it may also affect your credit score. So if you're using your card to build up your score, or to get a better card next time, it's something you need to be aware of.

Using too much of your credit limit may make you appear to lenders as if you’re not handling your credit sensibly, or that you’re struggling with your debts.

Ideally, you should try keeping your credit utilisation under 50%. So if your credit card has a £500 limit, avoid spending more than £250. If you have more than one credit card, and your total credit limit is £2000, try not to spend more than £1000 across all of your accounts.

Over time, your lender may decide to increase your credit limit. This means you may be able to spend more on your card and keep your credit utilisation under 50%. However, you should still be careful to stay within your means and not spend more than you can afford to pay off in full at the end of the month.

Enjoy your card’s benefits

If you use your credit card responsibly, you can start to build up a history of good credit, which will improve your credit score.

Credit cards also have other benefits, such as rewards, cashback and discounts when you buy from certain retailers. You also have the right to a refund if you buy anything worth over £100 and it’s faulty.

So, if you’ve been planning to tap your new plastic at anything that moves, it may be time to re-evaluate your priorities. But, if you were nervous about using your card, don’t be. As long as you stick to your budget and pay on time, you should be perfectly fine.

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Written by Hannah Salih

Content Creator

Hannah is currently studying for a Master's in Comparative Cultural Analysis. She knows all about personal finance, but as a student, she's an expert in money saving tips and tricks.