Tips for Managing Your First Credit Card

Full guidance About credit cards Uses

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.

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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.

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.

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.

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.

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.

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.

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.

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.