Key points about: using your first credit card responsibly
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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.1 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 use their cards to 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 improve your credit score, which may help you qualify for more credit and better interest rates.
Banks and card issuers use your credit score 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. Reviewing your credit score regularly allows you to track your credit health, see your progress over time, and detect suspicious activity like the unauthorized use of your card.
There are several free and convenient ways to check your credit score. For instance, cardmembers can use Discover's Free Credit Scorecard to check their score any time — just by logging in. You can check your Free Credit Scorecard as often as you'd like — without impacting your credit score — making it easy to monitor your credit health.
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 or exceeding your credit limit means that you're utilizing 100% of your credit.
Learn more about how credit limits are determined — and what you can do to improve yours.
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
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. 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.
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 interest charges 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.
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. Signing up for auto-pay will automatically deduct the minimum amount due from your bank account on the specified date, providing not only convenience but peace of mind. With automatic payments enabled, you'll never have to worry about forgetting a bill again — or impacting your credit score as a result of 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, check out our step-by-step guide to setting up automatic bill payments.
Your first credit card is a fantastic tool that can help make your life easier, but spending more than you can afford to pay back can result in debilitating 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.
Did you know?
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. The Discover it® Cash Back credit card lets you earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, and gas stations, and more, 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.1
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 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. To explore this topic further, check out our guide to reading credit card statements, which provides a detailed visual breakdown of all the items you’ll find on your statement and how to interpret them.
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 details of your credit card, 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 online purchases using your credit card if you're on 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.
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.
