- Personal Finance
The Biggest Mistake You'll Make With Your New Credit Card
Most people know that they should be watching their credit score, keeping on top of payments, and generally keeping an eye on their finances. But did you know that the very first purchase you make with your brand new credit card can have an influence on your future credit line for that card?
Companies use your first purchase with your new card as an indicator for how you will be using the card:
Luxury, brand-name store like Starbucks? Great.
Casino or liquor store? Red flag!
This is just one of the many ways that your bank determines whether or not to raise your credit limit, but it's the one least known to the general public and it's the easiest one to control! All you have to do is make a conscious purchase the first time you use your card.
What Not to Buy
The following is a list of places and types of things you should steer clear from when making your first purchase on your new credit card. Remember, buy whatever you want after the first transaction; they only use the first purchase to profile your buying habits as risky or safe.
- Fast food like McDonald's or Taco Bell
- Lottery tickets, cigarettes, or porn
- Liquor stores
- Casinos, especially the "cash cage"
- Telemarketers or infomercials
- Low-end retail like Wal-Mart or dollar stores
- Gasoline (this is debatable, since some cards have extra rewards for gas)
Purchases at these types of places indicate to the bank or credit card company that you may be a risky buyer, and they will be less likely to increase your credit limit, or if they do, they will increase it less than they would have otherwise.
To be safe, you also want to avoid making huge purchases (laptops, dinner for 10, etc) as your very first transaction on a new credit card.
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What to Buy
Now that we know what to avoid, let's look at some good ideas for a first-time purchase with your new card. These are not guarantees that your credit limit will shoot up, but they will indicate to your credit card company that you have spending money in your pocket and that you don't go around blowing it on liquor and lottery tickets.
- Starbucks or another higher-end food brand
- Gap, Victoria's Secret, etc (under $100)
- A meal for two at a local restaurant
- Bookstores or media stores (DVDs, etc)
Please note that these purchases should be in person and not online or over the telephone. We can all use any help we can get with keeping our credit scores up, and having a higher credit limit (without using it) can be a major boost to that. So buy a cup of Starbucks coffee and make your credit card company believe that you will be a responsible spender. Once you know the system, you can use it to your advantage!