Credit Card Basics for First Time Users

Getting a credit card for the first time can be a joyous experience for some. Obtaining that piece of plastic may be your first step to financial independence. Many get their first credit card during high school or college. A long-term card holder may be well seasoned in the rules and restrictions of credit, but a first timer might know next to nothing about the rules it entails. Having a firm grasp on the basics of credit cards is the best way to stay out of debt and have a prosperous credit future.

Spending limit
It may be easy to treat a credit card like an unlimited source of cash, but it's important to avoid overspending. A credit card comes with a set balance that you must ultimately be paid back. If you purchase concert tickets for $30 you will be responsible to pay that at a later time. Making purchases over time and not paying them back will negatively affect your credit score, a three digit number that determines one's credit worthiness. It is possible to increase your spending limit, though it's a good idea to hold of on this until you know you can be responsible with your spending.

Bill statement
Every month, each credit card customer will receive a statement, which shows your activity over the past month, minimum payment amount and the due date. A minimum payment is a percentage of your balance plus interest. As long as you make your minimum payments by the due date, you will fulfill you contractual obligation and can continue using the card.

Security precautions
When you receive your card, there will be a security number on the back, which you should make sure you keep to yourself. This security precaution, also called a CVV, is a three digit number on the back of your card, though some are four digits on the front. This number is specifically used for online and phone purchases in order to let merchants and other businesses know that you have the card in hand. This helps prevent credit fraud and unsanctioned purchases from going on your card.

A credit card can be a useful tool to use in emergencies and to get you out of a jam. Understanding the basic information about a card will help a first timer forego making costly mistakes.