You probably have your first taste of financial independence, and it is tempting to use your credit card on expenses you couldn’t afford in college. But be sure to use caution when spending. The following credit card basics for young singles can help you responsibly manage your finances.
Know the difference between smart and dumb debt
When you begin your professional life, it can be tempting to use a credit card for the things you want and need. That is why it is important to know the difference between smart and dumb debt. Dumb debt includes purchases you don’t need and can’t afford. Accruing this kind of debt can keep you from using your borrowing power wisely, like using loans to buy a home or finance a graduate degree. While mortgages and student loans are still debt, they are considered to be smart debt because they leave you with an asset. Make wise purchases with your credit card so that when you need to, you can achieve other financial goals.
Set your own credit limit
When you open a credit card account, the company will set a credit limit for you. This number will probably be based on your income and other items in your financial profile, including your credit score and other debts. Remember: Just because your credit limit is set at a certain amount, this does not mean that you should spend that entire amount. Make your own credit card limit -- one that fits your budget -- and stay within it, so you can properly manage your finances and not become overwhelmed by a large balance.
Pay down your existing debt
You may have some residual debt from your college years, especially if you racked up credit card debt or had a loan to finance your degree. Make a commitment to yourself and your financial future to pay off your existing debt. It is good idea to prioritize paying off the balance with the highest interest first because that is what will cost you the most in the long run. Then be diligent about staying out of credit card debt so that you can make wise saving and investing decisions.
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