Key Takeaways
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You can build a good credit history by using your first credit card responsibly, including making on-time payments and keeping your balance low.
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A cash advance from your credit card can be costly and may be best for emergencies.
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Review your monthly credit card statement for purchases you didn’t make and call your issuer if you suspect fraud.
New to credit cards? If you’re a first-time credit card user, you may be excited about the conveniences and opportunities your new card can offer, including a way to build your credit history. However, you’ll also need to manage the risks, such as spending more than you can afford to pay back.
The key to a thriving card membership is to develop good financial habits, from making on-time payments to keeping your card secure. This beginner's guide to credit cards shares some simple but effective tips to help you start your credit-building journey off on the right foot.
Learn how to build a good credit history with your first credit card
First-time credit card users can build a credit history with responsible use.
By paying your credit card bill on time each month and keeping your credit card balance low, you can establish a record of good credit management and you may improve your credit score, which may help you qualify for more available credit, better interest rates, and a wider range of rewards credit card options.
Banks and card issuers use your credit scores to determine what types of terms, rates, and products you qualify for. For example, some credit cards require applicants to have fair or good credit to be eligible for them. Reviewing your credit score and credit report regularly allows you to track your credit health, see your progress over time, and detect suspicious activity, like unauthorized use of your card. Keep in mind that you may have multiple credit scores, because each major credit bureau may receive slightly different information about your activity from your credit card company.
Review your credit card's terms
Each credit card has its own specific rates and terms. Before you apply for a card or start using it to make purchases, review your credit card agreement carefully and make sure you understand the terms you’ll be subject to. Pay special attention to details like:
Interest rates
Introductory APR offers
Cash advances
Late payment penalties
Payment due dates
Credit card fees
Credit limits
Understanding your credit limit
Every credit card comes with a credit limit, which refers to the maximum amount of credit that the issuer will extend you—or, in other words, the maximum amount you can charge to the card. If you reach or exceed this threshold while attempting to make a purchase, the transaction could be declined as a result. You could also potentially be charged a fee, depending on the card issuer. Additionally, your credit score could be impacted, as reaching your credit limit means that you're utilizing 100% of your credit. As you pay down your balance, you can make room in your credit limit to use your card again.
It's usually a good idea to charge only a small portion of your credit limit at one time. A high credit utilization ratio—which is the amount of credit currently in use compared to your total available credit—may hurt your credit score.
If you’ve only just begun building your credit, you may have a low credit limit. Many credit cards designed for beginners, like secured credit cards and student credit cards, often start out with low credit limits. Over time, as you use your card responsibly, your credit limit may go up.
Unpacking credit card fees
Credit cards come with assorted fees that vary from card to card. Some cards have higher fees than others, so it's important to factor this into the overall cost of using the card. For example, you should know whether you’ll be charged an annual fee and, if so, what the amount will be. Some other common examples of credit card fees include:
Balance transfer fees
Cash advance fees
Foreign transaction fees
Late payment fees
Returned payment fees
Whichever card you choose, be sure to familiarize yourself with the situations that can trigger fees or penalties, like making late payments, so that you can avoid being charged. You can minimize fee-related costs by choosing a card that offers the fewest and lowest fees possible, like no annual fee credit cards from Discover.
Pay your statement balance on time each month
Paying your monthly credit card bill on time is key to avoiding late payment fees, building a good credit history, and managing your debt. While it's essential to pay at least the minimum payment on your credit card statement each month, there are added benefits to paying your entire statement balance in full.
Depending on the terms of your credit card account, many cardmembers start with a minimum 21-day grace period before the issuer imposes an interest charge on regular purchases. But you’ll need to pay your credit card statement balance on time and in full every month. If you don’t pay your entire statement balance, you’ll carry debt into the next billing cycle, start accruing interest, and likely lose your grace period.
See if you're pre-approved
With no harm to your credit score.1
Set up payment reminders and automatic payments
Late or missed credit card payments are reported to the credit bureaus, which could have an impact on your credit score. To avoid accidentally missing or forgetting about payments, you can set up automatic reminders that notify you when a due date is upcoming. For example, Discover provides optional text and email alerts that notify you when your bill is due soon.
In addition to receiving reminders about upcoming bills, you can also enroll in automatic payments to help you build your payment history. Signing up for auto-pay will automatically deduct your monthly payment using your checking account or debit card on the specified date, providing not only convenience but peace of mind. With automatic payments enabled, you may never have to worry about forgetting a bill again or hurting your credit score with a missed payment. If you're a Discover® Cardmember, you can sign up for recurring payments simply by signing into your account and navigating from "Payments" to "Automatic Payments". For detailed instructions, review our step-by-step guide to setting up automatic bill payments.
Your first credit card can help make your life easier, but spending more than you can afford to pay back can result in challenging credit card debt and mounting interest charges. Impulse buying is especially risky when paying with credit. Many credit card companies have a mobile banking app you can use to monitor your spending. You may even be able to set spending limits and alerts to help keep you on track.
Create a budget for credit usage
When you're new to using credit, it can be tempting to view your card as instant money. However, while credit gives you the ability to make flexible purchases, it's important to use your new credit card responsibly and avoid incurring debts that you can't afford to repay. Along with setting spending limits and alerts, another effective way to prevent accidental overspending is to create and commit to a realistic monthly budget.
Following a budget makes it easier to accurately track and manage your finances, helping ensure you'll have adequate funds to cover your credit card payments and other expenses. Whichever method you choose, the first step is to determine what your income and monthly expenses are. From there, you can select a budgeting strategy that aligns with your goals, like zero-based budgeting, the envelope method, or the 50-30-20 rule.
Think twice before withdrawing cash from your first credit card
A credit card cash advance may help you out of a tight spot, but you should use this option sparingly. Unlike a regular purchase, there's rarely a grace period for a cash advance, so interest accrues when it posts to your account. In addition, credit card issuers usually apply a transaction fee (often 3% or more of the cash advance amount), and interest is typically higher than the standard purchase APR (annual percentage rate).
Learn about your credit card rewards program
Many credit cards offer credit card rewards for each eligible purchase you make. The rewards you can earn vary by card and issuer but may include cash back rewards on every purchase. Redemption options also vary by the card issuer. Make sure you can redeem your rewards in the best way for you and that you understand any limitations tied to your rewards, including whether they expire. Some rewards credit cards offer rotating category rewards that let you earn a higher percentage of rewards on specific spending categories that change throughout the year.
Did you know?
The Discover it® Cash Back credit card lets you earn 5% cash back on everyday purchases at different places each quarter, up to the quarterly maximum when you activate. Plus, earn 1% cash back on all other purchases - automatically.
Learn about credit card security
As a first-time credit card user, it’s beneficial to learn how your credit card issuer protects against credit card fraud, including what happens if someone makes an unauthorized purchase with your credit card or credit card information. As a Discover® Cardmember, you’re never held responsible for unauthorized purchases on your Discover Card.2
It's also a good idea to confirm other security protocols, like what to do if your card is lost or stolen. You can check your cardmember agreement for more details and you may be able to manage your card security using your banking app.
Review your credit card statements regularly
Besides reviewing your credit score and reports, it's also wise to regularly check your monthly credit card statements. Your credit card statement includes a record of your transactions over the course of a billing cycle, along with other important information like your credit limit and next payment due date.
Monitoring your credit card statements gives you an opportunity to review your spending and ensure that no fraud or unauthorized transactions have taken place. If you’re a Discover® Cardmember, you can check your statement any time simply by logging into your account on mobile or desktop.
Security tips for first-time credit card users
If this is your first time using a credit card, learning how to protect yourself from credit card fraud is essential. Consider these best practices:
- Don't give your credit card number or any other card details, including the expiration date or security code, out to others. Only provide your credit card information when making a purchase or payment to someone.
- Avoid making online purchases using your credit card if you're using public Wi-Fi unless you use secure connection services.
- Set up mobile alerts for when a purchase exceeds a certain amount to help monitor for large unauthorized charges.
- Carefully review your monthly credit card statement for purchases (big or small) that you don't recognize and contact your card issuer if you suspect credit card fraud.
How to use your credit card for the first time
Before you make your first credit card purchase, make sure the merchant accepts your card. Even if a retailer accepts credit, they might not accept every credit card company. Discover is accepted at 99% of places that take credit cards nationwide,3 but that may not be the case for all card issuers.
You should also make sure you’ve “activated” your card, which means you’ve confirmed to your credit card issuer that you’ve received your card and are ready to use it. You can usually activate your credit card online, over the phone, or through your credit card company’s mobile banking app.
Once you activate your card, you can use it the same way you might use a debit card or gift card.
Using a credit card for the first time in person
When you use your credit card in person, like at a gas station, grocery store, or movie theater, let the cashier know you’re paying in credit (or select “credit” if you’re using self-checkout). Then, you may insert your card’s EMV chip into the payment terminal, tap it on the reader, or swipe your card’s magnetic strip.
After you use your card, you may have to enter your PIN or zip code to prove your identity. Alternatively, the cashier might ask you to sign a receipt and check the signature on your card. These precautions can help keep your credit card info safe.
Once your purchase processes, the transaction will appear on your account.
Using a credit card for online purchases
When you select “credit” for an online transaction, you’ll have to enter your card information. Merchants usually need your credit card number, the date your card expires, your full name (as it appears on your card), your billing address, and your card’s three-to-four-digit security code, called the card verification value or CVV.
Before you enter your card information, make sure the website is safe. According to the Federal Trade Commission, one way to do this is by confirming that the website’s URL begins with “https”. The “s” stands for “secure,” and it means the information you enter will be encrypted, which makes it harder to steal.
If you’re new to having a credit card, it’s important to know that establishing good credit habits can help set you up for financial success. Using these credit card tips for first-time credit card users is a great place to start.
