A Guide to Using Your First Credit Card

KEY TAKEAWAYS

• Getting your first credit card is one of the most important steps toward building a great financial future.
• You need to follow some common guidelines while using your first card.
• Create a budget and track your spending.
• Set up Auto-pay to never be late on your bills.
• Check your credit reports and statements for fraudulent activities.
• Always remember to pay your credit card bills on time.

So, you’ve decided to get your very first credit card. It is a great decision and is one of the first steps you should take to create a strong financial future. But, credit cards don’t just make it convenient for you to pay for things. They are also a tool that can help you build a credit history and grow your credit score.

However, if used irresponsibly, a credit card can also be a burden, one that leads to an insurmountable debt that takes years to pay off. Before you make the decision to obtain a credit card, it’s important to understand the responsibilities that come with it. 

In this article, we’ve put together some tips for first-time credit card users to ensure you stay on the right track.  

Create a Budget

Before you even apply for a credit card, create a budget. Once you have a credit card, it can be tempting to overspend, but this can have serious financial consequences. 

Therefore, before applying for a credit card, create a detailed statement so you have a realistic idea of how much you can afford to spend each month. Once you have a credit card, refer back to this statement and adjust it if necessary, but never charge things to your card that you can’t afford to pay off by the end of your billing cycle. 

DID YOU KNOW?
Seventy-seven percent of U.S. adults had at least one credit card (Federal Reserve Bank of Atlanta)

Track Your Purchases

Creating a budget is the first step, but to ensure you never go over this limit, keep a close eye on your purchases. Tracking your purchases will allow you to see when you’ve gone over your monthly spending limit. 

We recommend checking your purchases at least once a week. You can do this online or even on your bank’s mobile app. Being disciplined about your credit card is one way to make sure you’re using it responsibly. 

Set Up Automatic Payments

It’s easy to forget about all kinds of bills, and that includes credit card bills. This is especially true for first-time credit card users who might not be used to the routine of paying off their credit card balance each month. For this reason, we recommend setting up automatic payments. 

Make sure that the scheduled payment is more than the minimum payment and that you have enough funds in your checking account before scheduling it.

Paying on time is necessary for maintaining a good credit score, which makes automatic payments even more important if you’re prone to forgetting about paying bills on time.

Watch Out for Fraudulent Charges

Even if you use auto-pay, checking your credit card statements every month can help you quickly catch anything suspicious. By law, you’re only liable for up to $50 in fraudulent charges on a stolen credit card, and many issuers waive even that. 

If you notice any charges that you don’t remember making, report them quickly so that you can get your money back and be sent a new card with a different number.

Keep an Eye on Your Credit Scores

Many wallet apps provide an easy way to monitor your credit score for changes and get an explanation as to why those changes occurred. Another good habit is checking your credit reports every quarter. 

You can also get one free credit report at annualcreditreport.com. If you notice anything unusual with your credit report, you must immediately report it to the credit bureau.

Pay Your Bill in Full Each Month

While credit card companies only require you to make a minimum payment each month, doing so is not wise as it will cost you more money in the long run. When you pay the minimum amount, interest is automatically added to your balance at the end of the month. 

Over time, the amount of interest racked up can be hefty. Therefore, we always recommend paying your bill in full and on time each month. 

Check Your Statement Frequently

Your credit card company will send you a monthly statement detailing your transactions from the previous billing cycle. Even if you’ve set up automatic payments, reading your statement is still important. 

Doing so will allow you to catch any errors or unauthorized payments. From there, you can report them to your credit card company and possibly receive a refund. 

FAQs

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