How to Prepare for a Credit Card

Female plant shop owner with credit card paying bills online at laptop in workshop
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Credit cards don’t come with training wheels, so when you get one, you’re dealing with the real thing. If you don’t know what you’re doing, you can get into real debt and experience real credit card problems. With a great financial foundation in place, you’re better prepared to use a credit card without destroying your credit rating or going into debt. 

Understand Money

A credit card is a digital or electronic form of money – which is a way to make transactions. Before you can properly use a credit card, you have to understand basic money management, e.g. that money is earned, you can spend the money available to you, and that each dollar you spend subtracts from what you have available. When you run out of money, you’re not able to spend more until you get more, so it’s important to make good spending decisions.

Understand Borrowing and Paying Back

A credit card is a type of “open-end” or revolving loan that you can borrow from continually as long as you abide by the terms (vs. a closed-ended loan that you can borrow only once).

Whenever you borrow money, whether, from a bank or a friend, you must know what the lender expects from you. Specifically, when you’re supposed to pay them back, the amount of the payments, and the date each payment is due. In addition, you should know what happens when you don’t fulfill what’s expected of you, e.g. if you don’t pay the money back on time.

Be Able to Meet Deadlines 

A monthly billing statement will likely be the only reminder your credit card issuer gives you to let you know your statement is coming due. Fortunately, your credit card due to payment will be due on the same day every month, so it’ll be a little easier to keep up with.

To prepare for a credit card, get in the habit of remembering and preparing for important dates without having someone else remind you. You may come up with a system for remembering due dates, like a calendar app on your phone, but use a system that’s reliable and consistent.

Manage a Checking Account

You need to have a solid history of handling your checking account without overspending before considering a credit card. How do you do that? Make regular deposits into your checking account, balance your checkbook, create a habit of checking your account balance before spending, and never write a check or swipe your debit card for more than your available balance.

Understand How Credit Cards Work

Credit cards are different from most of the financial products you’ve handled up to this point. You can’t see the money you’re spending and you’re not even spending money you actually have. Instead, you’re borrowing money that you have to pay back with your future earnings.

Basic credit card terms are fairly simple: you can borrow a certain amount of money (your credit limit) as long as you send a minimum payment by the due date each month. There are consequences if you borrow too much (go over the limit), send less than the minimum payment, or send the minimum payment too late.

Once you are mentally prepared for using a credit card, you should take some time to choose the best card that fits your needs.