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How to Use Your First Credit Card

Start with small, manageable charges. Don't pay late, and try not to carry a balance from month to month.
Sept. 12, 2019
Credit Card Basics, Credit Cards
How to Use Your First Credit Card
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You’ve jumped through all the hoops: the application, the seven- to 10-day wait, the activation. Now your very first credit card is safely tucked away in your wallet, waiting for its moment to shine.

Credit cards don’t just make it convenient to pay for things. They’re also a tool that can help you build a credit history and grow your credit scores — if you use them responsibly, that is. Why should you care about your credit scores? Because the higher they are, the more likely you are to qualify for loans, like a mortgage or car loan, with better terms and lower interest rates.

Even if you never plan to buy a home or finance a car, good or excellent credit (FICO scores of 690 or higher) can open doors. Many landlords check your credit when you apply to rent a home, and some employers do as well when you apply for a job. A good credit score may allow you to get a cell phone plan or access to utilities without having to make an initial deposit. And if you ever desire another credit card with an even more robust rewards program, good-to-excellent credit will help pave the way. Here’s how you can use your first credit card now so you can benefit later.

Start with small, manageable charges

Establish a history of responsible credit card use by making a few manageable charges on your card each month, just to get used to using it. One easy way to do this is to have a small, recurring payment, like a subscription for a streaming service, charged to your card.

You may want to limit your credit card use at first, sticking to cash or a debit card for some expenses while you adjust, and then using your credit card for more transactions over time.

» MORE: How using a credit card can help you build your credit

Avoid late payments

Once those credit card bills start rolling in every month, there’s one thing you absolutely must do: Pay at least the minimum amount due by the due date.

When you make a late payment, you may be charged a late fee, plus an interest payment on the unpaid balance. Late payments can also hurt your credit scores.

When you activate your first credit card and create your online account, you can set up free text or email alerts that will notify you a few days before your bill is due. Take it one step further by signing up for auto-payment so you never have to worry about a late payment again. Just be mindful of how much money is in your checking account each month so your auto-payment doesn’t result in overdraft fees.

» MORE: 3 credit card alerts worth setting up now

Stay out of credit card debt

Making the minimum payment will keep you in good standing with your card issuer, but racking up high-interest debt on the remaining balance can lock you into a never-ending cycle. The moment you make that minimum payment, you can make charges up to your credit card limit again during the next billing cycle, adding to the debt you accumulated previously.

As you get used to using your first credit card, try not to charge more than you can afford to pay back when your bill is due. Unexpected expenses may happen, and a credit card can help you pay for those things when you don’t have the cash on hand. But having an emergency savings fund available can make it possible to afford surprise bills without having to go into debt.

» MORE: What happens if you make only the minimum payment on your credit card?

Put limits on your credit card spending

Divide your existing credit card balance by your credit limit. Now multiply that number by 100. The result is your credit utilization ratio, a measure of how much of your total available credit you use and a major factor in the calculation of your credit scores.

NerdWallet recommends charging no more than 30% of your credit limit during each billing cycle (and even less if you can).

Establish a long credit history

Once you get your first credit card, hold onto it. Over time, it will increase the average age of all of your credit accounts, helping build your credit scores. As you become a more seasoned credit card user, though, your original card may not suit your needs anymore. You have a few options that will allow you to keep this credit account open:

  • If you need a higher credit limit, call the credit card issuer and ask whether a credit limit increase is possible. Keep in mind, however, that such a request could trigger a hard pull on your credit report and a temporary dip in your credit scores. Check with the issuer before proceeding.
  • If you’d like to start earning better rewards, ask your issuer about a product change, which can allow you to upgrade to a different card in that issuer’s family without a hard pull on your report or a change in your account number. This way, you don’t lose your credit history with the card.

You can also simply keep your first credit card open and use it once in a while to keep it active, while opening a second card that better matches your needs.

» MORE: Need a favor from your credit card issuer? Make a phone call

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 card, and many issuers waive even that. If you notice any charges you didn’t make, report them so you can get your money back and be sent a new card with a different number.

» MORE: How to prevent credit card fraud

Keep an eye on your credit scores

Apps like NerdWallet’s 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 report, which collects data that is used to calculate your score. You can get one free credit report per year from each of the three main credit bureaus at annualcreditreport.com. If you see anything unusual, report it to the credit bureau.

Here’s a trick for checking your report year-round: Instead of getting all three reports at once, download a different one every four months.

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