Credit Cards Credit Cards 101 10 Tips for Using Your First Credit Card Build Good Credit Habits From the Start By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on January 30, 2022 Reviewed by Khadija Khartit Reviewed by Khadija Khartit Twitter Website Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder. learn about our financial review board 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. Set a Budget 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. Try using a budget like the 50/30/20 method, which suggests spending 50% of your take-home pay on necessities like housing and groceries, 30% or less on items you want but don’t need, and 20% or more on savings and paying off debt. That will help keep your credit card spending in line with your income and other saving and spending priorities. Keep Track of Your Purchases 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. Set Up Automatic Payments 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. Paying on time is also important because payment history is the biggest contributor to your credit score, the three-digit number that lenders use to evaluate your credit usage. Aim to pay every single credit card bill on time to keep your score strong. Note Your credit card payment will be due on the same date each month, which makes it easy to keep up with your payment due date. 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. 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. Note Using only 30% of your credit limit is generally better for your credit score. 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. Paying only the minimum adds interest to your balance each month until you finally pay in full. Your balance will only decrease by a small amount each month, since a portion of your payment will be applied to accrued interest. The bottom line? Pay your balance in full each month to avoid paying interest. 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. Note Most credit cards come with a $0 liability guarantee, meaning you won’t be held responsible for fraudulent charges. However, based on federal law, you could have to cover up to $50 in unauthorized charges, if you wait too long to report the charges. If you create an online account or download the card’s mobile app, you can check your transactions in real-time and spot errors much sooner. You can even set up alerts that may help you catch suspicious activity right away. Redeem Rewards If you’ve chosen a rewards credit card as your first credit card, make sure you understand the rewards program. Maximize the cash back or points you earn by spending in the categories that earn the most rewards, such as gas or restaurants. Then, don’t let your rewards collect dust. Depending on your credit card, you can redeem rewards for a statement credit, a check to your bank account, travel, hotels, gift cards, and more. Some rewards have an expiration date, which means you’ll have to use them or lose them. Check your card’s fine print for its expiration policy. Use the Extra Perks Many credit cards offer other perks in addition to cash back or travel rewards. Rental car insurance; waived checked baggage fees; travel insurance; price protection, which provides a refund if an item’s price drops after you buy it; and extended warranty are just a few perks offered by many credit cards. If you’re wondering about the perks that come with your credit card, log in to your online account to review your credit card agreement or give customer service a call. Know Your Fees, and How to Avoid Them With the exception of an annual fee, you can dodge the majority of credit card fees by foregoing certain behaviors. For example, you can make your payments on time to avoid a late fee. Skip the cash advance to avoid a cash advance fee. Avoid foreign transaction fees on purchases made abroad by opting for a card that doesn’t charge them. Download the Mobile App Using your credit card’s mobile app lets you keep up with your credit card account on the go. You can log in any time to view your balance, check your available credit, make sure your payment posted, and more. You could do much of this from your phone’s browser, but apps are often designed for faster, easier use on mobile devices. Frequently Asked Questions (FAQs) Should I use a credit card for all my expenses so I can get more reward points? While some people charge most of their monthly expenses on their credit card to earn the most points possible, this only works if you pay off your card entirely every month. Otherwise, any rewards you get could be erased by the interest you pay. What happens if I am late with my payment? You run the risk of having your interest rate raised and paying a late fee even if you're only one day late. If you accidentally miss a month, you may end up damaging your credit report and lowering your credit score. What should I do if I lose my credit card? You should contact your credit card company right away. Be sure to keep your card number and the phone number for the credit card company in a secure location. That way, if your card goes missing, you can report it right away without having to search for the information. You may also be able to report a lost card through the credit card company's website or app. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. American Express. "What Happens If My Payment is Returned for Insufficient or Uncollected Funds?" Fair Isaac Corporation. "What is Payment History?" Fair Isaac Corporation. "What is Amounts Owed?" Capital One. "Credit Card Minimum Payments Explained." Federal Trade Commission. "Lost or Stolen Credit, ATM, and Debit Cards."