Your first credit card can be a step toward building a strong financial future and establishing an excellent credit score—or it can lead to a mountain of debt you struggle to repay for years. Before using your first credit card, here are some tips to guide you along the right path.
A credit card is a convenient way to make purchases and earn rewards, but it shouldn’t be used to buy things you can’t afford. Having a realistic idea of the amount you can spend and pay off at the end of the month will keep you from getting in over your head.
Calculating the amount you can afford to spend is the first step. After that, be diligent about tracking your purchases throughout the month, potentially with the help of your credit card’s mobile app or website. Once you’ve met your monthly spending limit, avoid using the card until you’ve paid off the balance. This kind of discipline helps you build a good credit score and keeps you out of credit card debt.
It can take time to get used to paying a bill each month. Protect yourself from late credit card bills by scheduling automatic payments ahead of your due date. Be sure the scheduled payment is more than the minimum payment—ideally, for your full balance—and that you have enough funds in your checking account before the payment is scheduled. Otherwise, you may be charged a late fee or a returned payment fee.
Use as Little
of Your Credit Limit as Possible
It can be tempting to max out your credit card—that is, charge up to your credit limit—but it’s crucial not to. Credit utilization, or how much of your credit limit you’re using, is the second biggest contributor to your credit score. That means running up a large credit card balance, and carrying it from month to month, can hurt your score. Plus, it can set the foundation for getting into credit card debt that can take a long time to pay off.
Pay Your Bill
in Full Each Month
Your credit card issuer only requires you to make the minimum payment, which is a percentage of your outstanding balance. While that may sound much easier and less expensive than paying the full amount you owe, it will cost you money over time.
Check Your
Statement Regularly
Each month your credit card issuer will send a
statement that details your transactions from the previous billing cycle.
Reading your billing statement is important even if you’ve scheduled
your monthly payment. You should review your statement to catch errors or
unauthorized charges. If you spot either of these, report them to your credit
card issuer immediately to be cleared up.
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