6 essential rules for young credit cardholders

By UK CreditCards.com

Too many of today's young people lack a responsible attitude toward credit cards, say experts. According to a recent Barclays survey conducted by the Social Market Foundation, 36% of 16 to 24-year-olds run out of money on a regular basis, while just 4% remember receiving any financial guidance at school. The poll of 1,250 young people also found that a third of teenagers believe that buying on a credit card is not really spending.

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Barclays' research indicates that many young people lack the understanding they need to manage their money effectively. With this in mind, CreditCards.com has put together 6 essential rules for young credit cardholders who are just starting out. Credit cards can provide a quick route into debt if treated irresponsibly. However, when used with these simple guidelines in mind, they can also be an extremely useful financial tool.

1. Only buy what you can afford to pay off at the end of the month
Credit cards are a cheap form of borrowing only if you pay off your balance in full each month. As a result, it's important to limit your spending so that you can pay off your balance before it begins to accrue interest. A credit card that offers 0% on purchases for a limited period of time can also be helpful if you expect to carry a balance. However, don't forget to pay the balance off once the promotional period ends. 

2. Pay more than the minimum amount due on your card
If you can't afford to pay your balance in full, try to pay off as much as you can each month. That way, you will pay off your debt faster, and you will save on interest payments. And, at the very least, pay the minimum amount due. Failure to do so will result in a poor credit history, and it could affect your ability to borrow in the future.

3. Limit the number of cards that you apply for
It is a good idea to avoid having too many cards because you can easily become overwhelmed by them. However, it may be worthwhile to have more than one card at a time. Different cards offer different features that can be useful to you, such as 0% on purchases for a limited period, cashback or rewards, or 0% on balance transfers.

4. Throw cash advance offers in the shredder
Avoid making cash withdrawals with your credit card, as this can prove very expensive. Card providers usually charge a fee for cash advances, and interest may also be charged from the date of withdrawal, rather than at the end of the month.

5. Take care when using your card overseas
If you intend to travel, check the terms and conditions of your credit card before using it for overseas purchases. Transactions in foreign countries can often be costly, so holidaymakers and gap year students should compare credit cards and prepaid credit cards to ensure they get a good deal.

6. Always think twice before you swipe
You should always think carefully before using your credit card. Despite Barclays' discovery that many youngsters do not regard credit card purchases as 'real' spending, the reality is that cardholders can easily find themselves spiraling into debt unless they remember to spend within their means.

See related: Credit card spending warning issued to students; The right credit card may cut overall holiday costs

Published: 8 March 2011