Credit Card Rookie? Avoid These Costly Mistakes

Getting your first credit card can make your life run smoother in various ways when used responsibly. You can build up a good credit score, benefit from a generous welcome sign-up bonus, enjoy travel perks and partner discounts, and utilize consumer protection on your purchases.

However, applying for your first credit card is not a process that should be rushed. You need to make sure you are choosing the right card for your finances, spending, and lifestyle.

Applying for the wrong credit card could mean that you are missing out on valuable perks, paying a higher annual fee than you need to, and spending with a card that doesn’t suit your buying habits.

What to Do After Applying For First Credit Card?

Once you get your first card, you need to make sure that you are using it correctly. Overspending, not paying your bills on time, and other bad habits can result in a bad credit score and affect your ability to apply for important loans and credit lines.

Luckily, there are some first credit card tips to help you when applying for first credit cards to make sure you get the most benefits and don’t fall into common credit card traps. Taking the time to learn how to get your first credit card is essential, so make sure to read our credit card tips below before you apply with any card provider.

What Should I Avoid When I Get My First Credit Card?

Here are five first credit card tips to make sure to follow after successfully applying for a first credit card. Sticking to these rules will help you to use your card successfully and avoid the bad results that come from undisciplined credit card use.

Find a Card that will Reward You For Your Spending

When working out how to get your first credit card, you will soon learn that the premium cards with the highest-tier benefits are likely to be unattainable. To access the best credit card benefits you will usually need an excellent credit score and history.

But that doesn’t mean that you shouldn’t research and shop around to make sure you are getting the best benefits available to you. There are some cards available to credit card novices that will help you to build credit while earning rewards for using them.

Mid-tier credit cards with lower annual fees sometimes include some generous signup bonuses of rewards points to get you started. You may be able to build up points or cash back with your everyday purchases with a credit card to get the most out of every dollar you spend.

So, make sure to do your research and check what’s available before applying for your first credit card.

Don’t Overspend and Fall Into Debt

When you get your first card, it is extremely tempting to start spending beyond your means. But, to avoid debt, stress, and future financial difficulties – you need to learn how to budget and manage your money effectively.

Make sure that you know exactly how your credit card works, your interest rates and fees, and when your payments are due. If you haven’t used a credit card before, the process can take some time to get used to.

Use budgeting apps to assess how much you can afford to pay back each month, and make sure that you will have that sum on your payment due date. You may need to adjust how and when you shop to reflect your new financial schedule.

Always Pay Your Bills On Time

Make sure you know when your credit card payments are due and arrange your finances so you can always pay in time. If you pay your balance after your payment due date, then this could result in you having to pay extra late fees, or even an increase in the annual interest rate of your card!

If you are a month or more behind on repaying your credit card spending, then this could result in negative reporting to the credit bureaus. If you have later payments reported to Experian, Equifax, or TransUnion, then this could remain on your credit history for up to seven years. Damaging both your credit score and your ability to secure important loans for education and housing.

If your credit card debt continues, then this could ultimately result in your card being canceled by the provider. Leaving you without a way to pay for certain essential services and items.

Make Sure to Pay the Full Balance on the Card

A common rookie mistake when it comes to your first credit card is paying less than the total balance on your card each month. If you carry over part of the balance to the next month, you will be losing money by paying expensive interest charges. You may also be putting a healthy credit score in jeopardy.

As a credit card holder, one of the factors that will affect your credit score is your Credit Utilization Ratio. This ratio describes the credit card limit which has been extended against your current credit balance. The lower this ratio is, the higher your credit score is likely to be.

Consistently paying off the full balance each month will help to keep your balance low during the credit statement closing period (when credit bureaus are updated by providers.) This is an essential lesson for those looking for first credit card tips.

Avoid Only Making Minimum Payments

Credit card interest rates can be expensive, particularly for those applying for first credit cards with little credit history. So, you will want to avoid carrying a balance across to the next billing period whenever possible.

The amount you owe will increase when you carry it across, leaving you with a bigger debt when it comes to the next month when you will have to pay that sum off as well as the amount you have spent in the past four weeks.

Your credit score will also suffer, meaning that you may struggle to secure other credit cards and face higher interest on loans and other forms of credit.

Recommended Credit Cards for Beginners

Now that you understand the potential pitfalls of credit card use, let's discuss some beginner-friendly options. Remember, the best card for you depends on your spending habits and financial goals.

Student or Secured Credit Cards

If you're a student or have a limited credit history, a secured or student credit card is a great starting point. These cards typically require a security deposit, but they can help build your credit over time.

• Secured credit cards: Require a cash deposit that acts as a credit limit.
• Student credit cards: Often offer lower credit limits and may have additional perks for students.

Cashback Rewards Cards

For everyday spending, a cashback rewards card can be a good choice. These cards offer cash back on purchases, which can be redeemed for statement credits or deposited into your bank account.

• Look for cards with no annual fee or a low introductory annual fee.
• Consider cashback rates on different spending categories (e.g., dining, gas, groceries).

Travel Rewards Cards

If you're a frequent traveler, a travel rewards card can offer valuable benefits. These cards often accumulate points that can be redeemed for flights, hotel stays, and other travel-related expenses.

• Be mindful of annual fees and spending requirements to earn rewards.
• Consider cards with travel insurance or lounge access benefits.

Important Considerations

• Credit Limit: Start with a manageable credit limit to avoid overspending.
• Interest Rates: Compare interest rates to find a card with a competitive APR.
• Annual Fees: Weigh the benefits of a card with an annual fee against the potential rewards.
• Rewards Structure: Understand how to earn and redeem rewards to maximize your benefits.

By carefully selecting your first credit card and using it responsibly, you can establish a solid financial foundation and enjoy the rewards that come with good credit.

Takeaway - Mistakes to Avoid When You Get Your 1st Credit Card

Learning how to get your first credit card and use it successfully involves research and planning. Many people get carried away with the process of applying for their first credit cards and don’t think about the best ways to use them for their financial future.

Use our first credit card tips above as a guide to the mistakes to avoid and start building a good credit score and history right away. Responsible credit card use from the get-go will set you on the right path for your future financial health and loan applications.