First credit card
First credit card

9 Tips for Managing Your First Credit Card

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If this is your first time owning a credit card, you’re probably pretty excited—but also maybe a little intimidated. Credit cards open up a whole world of transactions to you, especially online shopping. However, they also come with some risks: overspending, debt, and damage to your credit score are all possible with a mismanaged credit card. 

Don’t worry. Mint has you covered. We’ll explain the most important things to remember if this is your first time managing your own credit card, including responsible spending habits, picking a card with the best terms, and knowing how to stay on top of your statements so you don’t end up in debt. 

We’ll start with the basics: how to use your first credit card ever in a responsible way. 

How to Manage Your Card
Managing your first credit card doesn’t have to be stressful. By making sure you’re making payments on time, in full, and spending wisely, you can ensure you remain in good financial standing.

How to Use a Credit Card for the First Time

Using a credit card is fairly straightforward. You receive the card in the mail from your credit card company, then use it to finance various purchases throughout your month. Most credit cards these days have an online portal or app where you can track your spending and current bill. You can usually use that same portal to pay your balance when it’s due at the end of each billing cycle. If you prefer to do business by mail, you can also send a check to your credit card company. 

Now that you’re a credit card owner, it’s smart to know a little bit more about how credit cards really work. A credit card is a revolving credit product. Unlike a typical loan, which requires a borrower to take out a certain amount and pay it back over time, revolving credit allows a borrower to take out money up to a particular limit (known as a credit limit), pay it back, and then repeat the process. Credit cards function in this manner. It's a line of credit (which means a certain amount of money) that you may use to buy things but must pay back at the end of each cycle, which may be at the beginning or end of the month.

Credit cards are useful for a variety of things. For starters, they're practical. Instead of carrying cash all of the time, a card allows you to make purchases fast, even if they are pricey, with only a swipe or touch. This also offers a layer of protection. If you misplace a large sum of money, you're out of luck. However, if your credit card is stolen, many credit card issuers will identify the fraud and halt transactions, as well as perhaps refund you for fraudulent transactions.

Managing Your First Credit Card: 9 Tips to Follow

If you’ve been approved for your first credit card and are a first-time credit card user, it’s a good idea to keep the following tips in mind. Read through and be sure to apply them to your credit card spending habits once you start using a credit card. 

Make Sure You Understand Credit Card Terms

When you receive your first credit card, it will include paperwork that will lay out most if not all of the terms and conditions. While you don’t have to read the very fine print all in one day or one sitting, it’s important to review this material shortly after having the card in hand. Take the time to read through each section so you can know exactly what’s available to you – and note things that can potentially harm your credit

You’ll also want to review the company’s website as well for the most up-to-date information. In the instance you have any questions, don’t hesitate to contact customer service. They are available to address any concerns and should be able to rectify any issues you have quickly. Be sure to double-check if the credit card has any annual fees and familiarize yourself with the interest rate terms after the interest-free period expires.

It’s also good to keep these vocab terms in mind:

  • Annual fee: some cards charge you a flat fee each year for the pleasure of doing business with them. 
  • APR: this is the same as your interest rate; it’s the cost you’ll owe if you don’t pay off your balance in full. 
  • Balance: the amount of money you have charged to your card at a given time. 
  • Cash advance: a short-term cash loan that you can use your credit card to acquire.
  • Credit limit: the total amount that you can charge to your card. 
  • Grace period: a short period where you won’t be charged any fees.

Set Rules of How You’ll Use Your Credit Card

Setting rules for how you’ll use your credit card is essential. Figure out what you want to use it for whether that be groceries, travel expenses, a specific bill—having this boundary set upfront will help you prevent yourself from getting carried away. While familiarizing yourself with how everything works, start out by supplementing small purchases such as gas or groceries. You want to have small purchases that you can easily pay off before the end of each payment cycle.

Depending on the type of credit card, many offer interest-free promotions for at least 12 months. While this may seem tempting to spend as much as possible and pay it off at a later time, you don’t want to create this habit. For example, to build a positive credit history – determine what recurring expenses are manageable for you to pay timely. Let’s say you spend under $100 each month. Be sure to make a payment on or before the due date in full to establish solid financial habits.

Make Payments On Time

Paying off your balance each month can help you avoid interest. As mentioned above, interest is the money you are charged when you don’t pay off your full balance each month. By paying your balance in full every pay period, you’ll get two huge benefits: no interest, and a boost to your credit score over time. 

Be Mindful of Your Credit Limit 

According to FICO, your credit utilization rate is calculated by dividing your outstanding balance by your total credit limit. Many people understand the notion that it’s not ideal to have no credit available and it’s not great to utilize a large amount of credit. It’s imperative you set some ground rules and abide by them as much as possible. The ratio of your overall credit limit versus the credit balance can be defined as credit utilization

Let’s use a real-life example. Your total credit amount is $10,000 and you have used half – this is $5,000. Based on this current scenario, your credit utilization is 50%. Ideally, you want to keep that number under the 30% threshold. I know what you’re thinking – why if this is the credit limit I was given? Using a fraction of what’s available to you provides the credit card lenders with the confidence that you have the ability to make timely payments each month and can exercise discipline.

As your credit utilization increases over time, your credit score has the potential to be negatively impacted if you use the total amount you’re awarded. To prevent this from happening, it’s important to ask yourself, is this helping or hindering your financial journey? Pay very close attention to your posture when it comes to spending as well. Do you consider yourself an impulsive spender? Do you tend to make money decisions when experiencing any type of emotional duress? Lenders of any kind want to have the confidence that you have the discipline and willpower to financially handle any and all credit obligations, no matter your personal circumstances.

Keep an Eye on Credit Card Activity

With so many ways to view your account details, take the time to review your credit card statements and/or your charges online. Not only are you verifying that each purchase is valid, but it also helps you see exactly where and how you are managing your card. If something doesn’t appear accurate, contact your lender immediately to resolve it as soon as possible.

Fortunately, there’s an easy-to-use convenient tool that first-time credit card users can use to monitor their activity, the Mint app. With the Mint app, you can see all of your transactions and keep a close eye on credit card activity right from your phone.

Have a Plan for Managing Debt

When you use a credit card, you're basically taking out a small short-term debt. The terms of the loan stipulate that it must be paid off by the end of each month. Debt accumulates when you don't pay off your credit card charge each month. Even if you make the minimum payment—typically a percentage of the entire debt, such as $30 or $50—interest will start to accrue on the remaining debt. Around 35% of millennials have credit card debt, which can start to have a severe impact on your finances after a time.

Credit card debt is a serious issue for many Americans. If you find yourself in credit card debt, it’s critical that you have a plan for dealing with it. 

You can use Mint’s free credit card payoff calculator to get started. 

Notify Your Provider of Any Hardships

In the instance you experience any type of financial hardships in the future, please make it a priority to communicate this as soon as any issues arise. Many times, explaining any personal mishaps while proposing reasonable solutions may work in your favor. Remember, avoidance is not acceptance. Make it a priority to familiarize yourself with your credit cards’ terms and conditions out of sheer preparation. 

When discussing the topic of finances, many of us aren’t too keen on disclosing personal information — especially to those we haven’t established any rapport with – however if this can result in not impacting your credit score; it’s better to be upfront and honest! Being proactive not only provides leverage but can also guarantee more favorable solutions in the end.

Use Rewards So They Don’t Go to Waste

Depending on the type of credit card you have, you may have points that accumulate and be redeemed over time. Travel rewards, discounts, or credits toward your balance are just a few options that may be offered to you. Visit your lender’s website to investigate and stay current with all of the benefits available to you. Don’t forget to download the Mint app and connect your new card to have balance and card information quickly at your fingertips.

Be Wary of Cash Advance

It can seem like a sweet deal to utilize the cash advance option if you find yourself in a crunch. However, there are so many fees and complicated specifics that can leave you with feelings of regret, frustration, and confusion. It’s best to find another alternative – every option provided by a lender is just that, an option. You don’t have to redeem it. Knowing when offers are of no benefit to you can help protect your financial well-being.

Build Healthy Credit Habits Now & It’ll Pay Off Later

Building a healthy relationship with your credit card is a critical part of developing a strong personal financial profile. The more time you invest in learning how to appropriately and carefully use your credit card now, the better off your personal finances will be in the future.

Mint can help. By compiling all your bills, budgets, and savings information into one convenient location, you can use Mint to boost your financial well-being and keep tabs on all your credit cards. And for more tips, be sure to check out our guide to using your first credit card

Marsha Barnes
Marsha Barnes

Written by Marsha Barnes

Marsha Barnes is a finance guru with over 20 years of experience dedicates her efforts to empower women worldwide to become financially thriving. Financial competency and literacy are a passion of Marsha’s, providing practical information for clients increasing their overall confidence in their personal finances. More from Marsha Barnes

Sources

Consumer Finance Protection Bureau | Federal Trade Commission | FICO | Statista