How To Use Credit Cards for the First Time

Your very first credit card can be a step forward toward building a solid financial future. It can be a path to establishing a strong credit score. However, it can also result in a mountain of debt and leave you struggling to repay it for years. So, here are some handy guidelines to get you started with using your first credit card.

Have a Budget

Although it is an easy way to earn rewards and make purchases, a credit card shouldn’t be used to purchase items you can’t afford. Having a solid idea of the money you can spend and pay off at the end of the month will help you stay on track with your budget. You could consider budgeting via the 50/30/20 method, where you spend 50% of your take-home pay on necessities like groceries and housing, 30% on items you want, i.e., non-necessities, and 20% or more on paying off debt or adding to your savings. This will help you adhere to your credit spending rules and maintain it along with your income and other spending and saving priorities.

Tracking Your Purchases

After you calculate the amount you can afford to spend, be disciplined about keeping track of your purchases. Use your credit card’s website or mobile app to help you with tracking purchases. Once you reach the monthly spending limit, don’t use the card until the balance amount is paid. This kind of diligence will help you avoid credit card debt and build a good credit score.

Schedule Automatic Payments

Paying a bill each month can take time to get used to. However, by scheduling automatic payments ahead of your due date, you can protect yourself from late credit card bills. Ensure that the scheduled payment is greater than the minimum payment if not your full balance and that funds in your checking account are sufficient before the payment is scheduled.

Avoid Maxing out Your Credit Card

Using your credit limit to its full capacity can be tempting, but it’s important that you don’t. Your credit score is also determined by credit utilization, i.e., how much of your credit limit is utilized. Accumulating a large credit balance and carrying it month after month can negatively impact your score. In addition, it can be a strong influence on getting into credit card debt.