Getting Your First Credit Card? 5 Things You Should Do

Credit cards provide easy access to credit. But if you are not careful, it could entrap you into a debt spiral, leading to low credit score and further borrowings to settle off your old debts

- Manas Malhotra

Those of you in your early 20s (Gen Z), may be thinking of getting your first credit card, as it allows you freedom to spend the way you want to. However, it's also a major step in handling your own finances.

Credit cards offer easy access to credit, and is also a convenient way of establishing a credit history. Cashless transactions, reward points, no-cost equated monthly instalments (EMIs), and discounts on shopping and dining are some of the benefits these cards offer.

Yash Verma, a 22-year-old salaried professional, has been using his credit card for a year and views it as an essential tool for managing his finances. He uses it for paying his bills, and for shopping and expenses at petrol stations, particularly when his bank balance is low. Says Yash, "Using a credit card is an advantage, as it offers solution and flexibility when I feel financially stretched." He seems to manage his debt in a way that the rewards and other benefits outweigh the risk of debt.

But along with the flexibility and convenience comes the risk of falling into a debt trap or overspending. Says Gaurav Goel, founder, Lamoksh Investments and a Securities and Exchange Board of India-registered investment advisor (Sebi-RIA), “Easy access to credit can lead to overspending, and credit card loans carry a high rate of interest of 30-40 per cent annually. Hidden fees, late payment penalties, and high credit utilisation can impact your credit score, making future loans harder to secure. Also, the lure of rewards, fraud risks, and minimum payment trap can lead to financial strain.”