How to Use Your First Credit Card

Trisha Miller  | 

Being approved for your first credit card is a huge step toward financial independence. It’s an exciting time for anyone who’s new to the credit card world. However, there are some things you need to know about credit cards and how to use them the right way. Racking up too much debt is a fast way to get in over your head. You should never spend more than you can comfortably pay off. In addition, you should know a bit about how cards affect your credit, what kind of interest rates you’ll be looking at, and what annual fees you might incur.

Apply for Your First Credit Card

Start With A Low Limit

What kinds of things should you be looking for in a credit card? Well, first I would suggest looking for cards with a fairly low limit to start. That will keep your total amount due within a manageable range, no matter how much you spend. When you’re new to the credit world, it’s always a good idea to start with less. It’s easy to become overwhelmed with debt as it adds up, in addition to any fees or interest you will be charged.

Understand Interest Rates

This brings us to my next point: you’ll want to research what your interest rate is and what kinds of annual fees you’re going to be looking at. Every card has their own set of rules when it comes to fees, interest, and when payments are due. So, when you’re researching cards, make sure to take an in depth look at all of the fine print associated with your card. You don’t want to be met with any surprises when you get your first bill.

Most credit cards will vary anywhere from ten percent to 30 percent interest on your purchases — ten being quite low for a credit card interest rate and 30 being quite high. For your first credit card, around 18 to 25 percent interest is about normal, give or take a percent or two. As far as fees go, some cards have no fees and others could have up to a $100 fee each year. That’s quite high, so I’d try to stick with something that is 50 dollars or less, which is not hard to find.

Understand How Credit Cards Affect Your Credit

When you apply for a credit card, your credit is checked. The bank or lender wants to know that you have a good history of paying back any money that you borrow and that’s what your credit score reflects — a good, fair, or bad history of borrowing money. If you’re deciding on your first credit card, you likely have not borrowed any money yet. In that case, some credit cards may be hard to be approved for, especially if you’re trying to get a higher limit or one with less interest and fees.

Watch Out for Too Many Credit Checks

As such, you’ll need to know that one check on your credit isn’t going to make a difference, but several of them in a short period could have a negative impact on your credit. Applying for multiple cards in order to get approved for one isn’t a good strategy. Most cards that are easier to become approved for will tell you so. Again, most of them will be a lower limit card and you might have to deal with a little bit higher interest and/or higher fees per month.

There’s also another option, called a secured credit card, that is great for those new to credit. You put down a deposit, usually about $200 to $500, the bank holds that money, and then they open up a line of credit for you. You spend the money just like a regular credit card, but the bank always has that collateral in order to protect you and yourself. These are usually easy to be approved for and are fantastic when you’re first learning about personal finances, budgeting, and credit.

For more information on how credit works, visit our credit score resource center.

Prepare to Use Your First Credit Card

Let’s start with, “why do I want a credit card?”. This is the most important question to ask yourself. If you’re wanting a credit card simply so you can spend a lot of money, you shouldn’t get one. All that will accomplish for you is racking up debt, stress, and a bad credit score. The best reason to get a credit card is to assist you with occasional purchases that you know you can pay off quickly. If you stick to this plan, over time, you’ll also benefit from having a good credit score.

Keep Your Balance Under Control

Once you decide on a card, you’re going to be wondering exactly what it should be used for. Using your credit card for large purchases is okay as long as you can pay them off. Having a maxed out credit card for an extended period of time will reflect poorly on your credit history. Every line of credit that you have contributed to what is called your “credit utilization ratio”.

For example, if you have a $500 credit card and you spend all of it, your credit utilization ratio is maxed out, which doesn’t look good for your credit. Banks will look at your credit and understand that you cannot handle anymore lines of credit if you can’t handle the one that you already have. This is why it’s important to keep your balance low and only use it every once and awhile.

It’s better for day to day purchases, like groceries or gas, to start. These types of small transactions will help you get comfortable with a charging and paying off routine, which can help you get all of your finances in order. If you feel comfortable spending a couple hundred dollars on something that you know you can pay off quickly, again, totally go for it, but just make sure that it actually feels manageable to you.

Know What Happens If You Can’t Pay

In the case of a standard credit card, your bank will send your balance to a collection agency who will attempt to get the debt from you. They may add on additional fees and interest the longer that you wait to pay it. In addition, this will destroy your credit score. If your total is sent to collections and still not paid, you may have a hard time getting approved for future loans or lines of credit.

On the whole, having a credit card is a smart financial decision, particularly for those who are looking to jumpstart their credit score and form solid financial habits. Just know, that having a credit card is a privilege. It can help you make strong, informed purchases and shouldn’t be used simply for the sake of “fun money”. Learning how to use a credit card is key to financial independence and the formation of good habits that will stay with you for the rest of your life.

Need more information on how to use your new credit card? Visit our credit card resource and learning center for more tips and guides.


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Trisha is a writer and blogger from Boise, ID. She is a dedicated vegan, an avid gamer, cat lover, and amateur SFX artist.

This post was updated December 14, 2017. It was originally published October 13, 2017.