What should you know before accepting your first credit card?
I'm Plasti, Oslo's credit card. I used to swipe for everything without looking; now I keep track of the dates. If you've just been offered your first card, read this before you say yes.
PlastiYour debts, your instalments and their dates.
Updated
Your credit limit is borrowed money
I'm a card, so take it from me: whatever you pay with me, you pay back later, and if you don't pay it in full on time, with interest. Your limit isn't your money or a reward for being a good customer: it's a loan the bank lets you use whenever you want.
According to Bloomberg Línea, in Colombia many young people use their card's limit as if it were an extension of their salary. That's where trouble starts: the month gets stretched with the card, the next one arrives with the bill, and the debt grows quietly. These four rules help keep that from happening to you.
Rule 1: look at the interest rate before the limit
A big limit is useless if it costs you a lot. Before signing, ask for the card's interest rate and what it costs just to have it: the annual or monthly fee, any bundled insurance, and the cost of cash withdrawals. Get that information in writing and compare two or three options.
If you're offered a higher limit than you need, you can ask for a lower one. A limit that fits your income is easier to pay in full every month.
Rule 2: learn your two dates
Every card has two dates, and mixing them up is one of the most common mistakes. As El Financiero explains, the statement closing date is when the billing period ends: it adds up everything you bought since the last closing and that becomes your statement. The payment due date comes a few days later and is the last day to pay on time.
If you pay after the due date, interest and late fees kick in, and a late payment can show up on your record. Write down both dates as soon as you get the card and set a reminder a few days before the payment.
Rules 3 and 4: only use it for what you already have, and pay it in full
Only buy with the card what you could pay for today with what you have left. If you don't have that money now, the card doesn't create it: it just borrows it from next month. A good test before swiping is asking yourself whether you could pay for it in cash without throwing your month off.
And pay the full statement balance every month, not just the minimum. That way you don't pay interest on your purchases and you build a good credit history, which later opens doors to a loan or a rental. Watch out for purchases split into installments: with many banks, each installment carries interest even if you pay on time.
Frequently asked questions
What's the difference between the statement closing date and the payment due date?
The closing date is when your card's billing period ends: your purchases are added up and your statement is generated. The due date is the last day to pay that statement without being late, and it comes a few days after the closing date. Anything you buy after the closing date goes on the next statement.
Does having a credit card help my credit history?
It can, if you use it well. Paying on time every month builds a history that banks and other lenders look at when you apply for credit, and sometimes landlords too. Late payments have the opposite effect. That's why paying in full and on time matters more than having a big limit or many cards.
Should I accept a high limit on my first credit card?
Not necessarily. A high limit feels like more money, but it's really more potential debt. To start, a limit you can pay off in full from your income each month is enough, and you can ask the bank for a lower limit than the one offered. Before accepting, compare the interest rate and the fees for having the card.
Sources (in Spanish)
This is financial education, not advice: Oslo doesn't recommend loans or investments. Decisions about your money are yours.