First Credit Card Do's and Don'ts Checklist

Applying for your first credit card is a milestone. You’re probably eager to establish good credit and have the financial freedom to make purchases without worrying about having cash on hand.

Before you start using your new card, it’s important to have a handle on the do's and don’ts of paying with a credit card. If you’ve never had a credit card before, you might not be aware of some of the potential pitfalls that await if you’re not careful.

We want your experience using your first credit card to be a positive one. That’s why we’ve put together this checklist of first credit card do's and don’ts for your benefit.

First Credit Card Do's

Let’s start with the things you should be doing. A lot of first-time credit cardholders make mistakes that cost them in the long term. We want you to know what you should be doing to make sure that doesn’t happen to you.

1. Do make sure that you understand all charges and fees associated with your card. For example, most credit card companies charge fees for cash advances. All cards have a credit limitation and penalties for late or missed payments. You shouldn’t be using a card unless you understand how it works.
2. Do set up a payment due date that works for you. Most financial institutions will let you pick a date. Taking a moment to review your finances and obligations can help you pick a date that won’t leave you in a bind or make it difficult to make your payments on time.
3. Do set spending limits for yourself. One of the ways that people who get a credit card for the first time get in trouble is that they spend too much and then struggle to pay it back. Credit cards work best if you don’t go overboard. Make sure to work out how much you can afford to spend each month and stick to it.
4. Do ask questions of your financial institution. At Addition Financial, we encourage our members to ask questions when they apply for an account with us. Educating yourself about how things work is one of the best ways to avoid problems down the line. Any institution that doesn’t have time to answer questions isn’t an institution you want to do business with.
5. Do choose a card that will help you build a credit history. Not all credit card companies are interested in helping people establish credit. Your first card should be with an institution that understands the value of good credit and will work with you to achieve your goals.
6. Do pay your balance in full each month if you can. If you can do this, you’ll save a significant amount of money on fees and interest. Carrying a balance is unavoidable sometimes, but your goal should be to pay for what you buy every month.

These six simple do's can help you eliminate many of the problems that people encounter when they get their first credit card.

First Credit Card Don’ts

Now, let’s talk about the things you shouldn’t be doing with your first credit card. These are common mistakes and pitfalls, and avoiding them can go a long way toward helping you establish good credit.

1. Don’t use your card to buy things you can’t afford. You might qualify for a card with a $2,000 limit, but if you can’t afford to spend that kind of money, you shouldn’t put it on your credit card. It’s very easy to go overboard with a credit card if you’re not experienced using one, but your budget before you got the card should not change because you have the card.
2. Don’t carry a balance if you can help it. Any time you carry a balance, you’re paying more than your purchase price. Sometimes carrying a balance is unavoidable, but as a rule, it’s best to pay off your balance each month.
3. Don’t settle for a credit card with annual, cash advance or balance transfer fees. Credit card companies that rely on you missing payments or using your card your way are only interested in making money off of your financial situation. Not-for-profit financial institutions, like credit unions, often have more competitive credit card offers because they aren’t completely focused on making a profit.
4. Don’t max out your card. Your FICO score takes your rotating balance into account. As a rule, if you must carry a balance, keep it to a maximum of 30% of your credit limit.
5. Don’t miss payments. Sometimes, first time credit card holders will delay a payment because they can’t pay the entire balance. While we think it’s best not to carry a balance if you can avoid it, it’s better to make a payment and carry a balance than to miss a payment. Remember, late payments show up on your FICO report.

Having a credit card is a responsibility. Avoiding these common mistakes can help you build good credit now.

If you’re applying for your first credit card, it’s essential to understand the best way to handle it. At Addition Financial, we work with members to make sure they are prepared to use their cards in a way that will help them establish good credit.