How to use a credit card for the first time
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“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Published 5:05 a.m. UTC Dec. 26, 2023
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Opening your first credit card is a key stepping stone to building strong credit, which in turn can make it easier to get favorable rates on other types of loans, like mortgages, auto loans and student loans.
Knowing how to use your first credit card will allow you to maximize the benefits of your card and avoid any missteps that might cause financial setbacks. Here are some tips for credit card beginners below to help you make the most out of this financial milestone.
1. Monitor your credit
You know how to get a credit card. But knowing the basics about how credit works will start you out on the right financial footing.
Your credit score is generated based on the information in your credit reports, which is collected and compiled by three major consumer credit bureaus — Experian, Equifax, and TransUnion. These reports contain information about any and all of your credit accounts with details that include your payment history and credit inquiries from lenders that appear when you apply for a credit card, auto loan or other financing.
The factors that most impact your credit score in order of impact include: payment history, the amounts you owe on your accounts, the length of your credit history, your credit mix and new credit requests.
Many credit cards and banks let you see your score for free each month and offer tools or alerts that will explain why your score has increased or dropped in a given month. If you notice any unusual changes to your credit score, you’re entitled to a free credit report each week from each of the three major credit bureaus via AnnualCreditReport.com. Reviewing your full credit report allows you to check for errors or fraudulent activity.
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2. Always check your credit card statements
Your monthly credit card statement provides a lot of information including your annual percentage rate (APR) and a list of all the transactions you made with your card during that billing cycle. Reviewing your statement is an opportunity to make sure that there are no incorrect or fraudulent charges on your credit card.
You don’t have to wait until the end of the month to check your balance, you can log on to your account via the issuer’s website or mobile app and see your statement anytime you’d like.
If you’re carrying a balance, have a look at the little box on your statement that illustrates different payoff scenarios. It shows that if you have a significant balance, just paying the minimum amount due each month will keep you in debt for years — and cost you much more in interest.
How do credit card minimum payments work? Here’s everything you need to know.
3. Never miss or skip a payment
Your payment behavior is the most important factor in your credit score, accounting for 35% of your FICO Score. If you miss a full payment cycle (paying 30 days or more late), the credit card company will report it to the credit bureaus. That missed payment will remain on your credit report for up to seven years, and it may cause your credit score to drop.
You can set up automatic payments on your account so that even if you forget to manually pay your balance, at least your minimum amount due will be paid. This way, you’ll never be late on a payment.
Find it easier to use your credit card than to pay the bill? Here’s 5 ways you can pay your bill so you don’t miss a payment.
4. Mind your credit limits
The second biggest factor for your credit score (30%) is credit utilization, or how much of your available credit you’re using. For example, if you have only one card with a $1,000 credit limit and you owe $850, you’re utilizing 85% of your credit. The credit scoring algorithms tend to favor cardholders who keep their utilization below 30%.
You can set an alert in your credit card app to let you know when you’re approaching a certain balance amount so you can scale back spending. Instead of paying once per month, you can split the bill into two or more payments so that your balance never gets too high.
5. Add new credit slowly
Once you start using your first credit card, the offers will keep rolling in, but you don’t want to get in over your head with too much credit. Plus, if you apply for too many new accounts in a short period of time, your credit score will take a hit.
Keep your original card account open since the length of your credit history is a factor in your credit score. When you outgrow that card or it no longer matches your spending habits, apply for just one to two new cards or lines of credit per year.
Final verdict
Building strong credit as a first-time credit card user comes down to understanding how credit works and using it to your advantage. Learning how to use credit cards by trial and error will likely get you into trouble, and may make your credit card companies a lot of money.
Instead, gain confidence and know-how with your first card by making small purchases at first, and paying them off in full every month to avoid interest. Monitor your progress, and as you rise into good credit score territory, you will be able to qualify for better cards that provide higher value and more lucrative benefits.
Frequently asked questions (FAQs)
Getting your first credit card is fairly easy as long as you have an income or are a college student. In fact, college students may be able to use income from grants or scholarships, or from a spouse or partner to qualify for a student card. Target an entry-level credit card designed for students or people who are new to credit, and you may have an easier time qualifying.
Once you use your first credit card to build your credit and attain a good to excellent credit score, you’ll have access to the best credit cards on the market, including travel rewards and cash-back cards.
Before you apply for a credit card, it’s important to learn how to use credit cards to your advantage. You should have a general knowledge of how credit works and how to check your credit score and credit reports so you can monitor your credit health. It’s also helpful to learn credit card tips that can help you choose the right card and maximize the value of its benefits.
The best way to use a credit card is to try to utilize it as a payment tool rather than a loan — unless you need to make a large purchase and can get a 0% APR deal you can pay off during the introductory period. You can avoid paying interest on your credit card by paying the full balance each month by the due date. Staying within your budget and giving yourself a spending limit can help to ensure that you are able to make the full payment.
There is no “right” number of credit cards a person should have. Generally, when you’re just starting out, limit yourself to just one or two. Then, moving forward, try to only open new accounts only when necessary or to take advantage of an attractive offer – and no more than one or two per year. As long as you are able to manage your credit responsibly, it’s fine to juggle multiple cards, especially if you enjoy earning rewards in certain spending categories.
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