How to use your first credit card


Getting your first credit card is an important step on the road to building the credit you’ll need later in life. By using your new credit card responsibly and wisely, you can begin to build a valuable credit history and develop new habits that will benefit you for decades to come.

You’ll want to make sure you have a plan in place that helps you get the most out of your first credit card while avoiding major plastic pitfalls. As we all know, far too many people struggle financially with their first credit card, either racking up debt or making late payments that end up hurting their scores.

If you’re excited about your new card and want to make sure you use it to your advantage, here are some steps you should take right away.

Only use your card for purchases you can afford to refund immediately

Due to the high interest rates charged by credit cards, they are rarely the best option if you need to carry a balance for more than a month. After all, the average interest rate on all major credit cards is currently close to 17%, and many starter cards charge even higher rates.

With this in mind, you should only charge for purchases you can afford to pay for immediately and refrain from using plastic for “fake” purchases. Also, try using your credit card alongside a monthly budget or spending plan.

Get into the habit of paying your balance in full

Charging only what you can afford also paves the way for paying off your credit card balance in full each month. This step will not only help you avoid paying credit card interest, but it will also help you avoid a growing debt balance.

Paying your credit card bill in full each month can also help you control your credit utilization rate, which is how much you owe on your cards compared to your credit limits. The amount you owe on your credit card is 30% of your FICO score, making it the second most important factor. It’s right after payment history, which makes up 35% of your score.

Most experts suggest keeping your credit utilization ratio below 10% (or 30%, at most) for best results.

Set up automatic payment

As we’ve already mentioned, your payment history is the most important factor that determines your FICO score, so you should make sure you never pay your credit card bill after it’s due. If you’re worried about forgetting, consider setting up automatic payments to be taken from your bank account on the due date of your credit card bill.

You can even set up autopay only for the minimum payment amount to be paid automatically. This won’t help you avoid carrying over a balance from one billing cycle to the next, but it will help you avoid late fees and an APR penalty.

Earn rewards on your spending

If your new credit card offers cash back or rewards points on your spending, you should make the most of this benefit without putting yourself at risk. For example, be sure to charge for purchases that fall into bonus categories offered by your card, but don’t overspend just to earn rewards.

Also, try to meet the minimum spending requirements that you must meet to get a sign-up bonus. Don’t buy things you don’t need to reach the threshold.

The rewards aren’t worth it if you end up with a balance. With most credit cards offering up to 2% cash back and current card interest rates around 17%, it’s easy to see how chasing rewards while you’re in debt is easy to see. is a losing proposition.

Familiarize yourself with the advantages of your credit card

Also, be sure to read about any benefits or features offered by your credit card, which may be extended warranties, protection against damage or theft, or travel insurance benefits.

By knowing the advantages offered by your credit card, you will be in the best position to take advantage of them. Remember that most perks require you to pay something with your card first. For example, you will only receive travel insurance benefits for trips that you charge to your credit card, and purchase protections only apply to items that you have paid for with your credit card.

Monitor your credit score

Finally, be sure to monitor your credit usage and progress along your credit journey. This can help you spot problems as they arise, and monitoring your credit can also help you spot signs of identity theft or fraud.

Fortunately, many credit card companies give you access to a free credit score on your monthly credit card statement. Programs like Capital One CreditWise and Chase’s credit journey can also help you track your credit score and overall credit health for free.

The bottom line

Getting your first credit card approved can be an exciting time, but you need to make sure you have a plan to maximize the experience. By intentionally using your card, avoiding long-term debt, and making the most of your credit card rewards and benefits, you can get more for your money and begin to build positive credit habits that can last. a lifetime.


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