4 Tips on Using Your First Credit Card

No matter what age you are, getting your first credit card is a momentous and crucial step to strengthening your financial outlook. Not only is it exciting to have one in the first place, but once you make your first purchase, your credit history is born.

With that said, a credit card is a major responsibility. If you don’t pay your bills on time, you could end up lowering your credit score and racking up mountains of debt. Your biggest goal should be ensuring that you have as high of a credit score as possible so, in the future, you can have the best chance to qualify for the lowest interest rates and fees for new loans and lines of credit.

Stay Under 30% of Your Total Credit Limit

The percentage of available credit you can use is called your credit utilization ratio. Surprisingly enough, this is a major contributor to the state of your credit score! When your utilization ratio creeps up too high–if, for example, you have a balance of $2,500 with a $3,000 limit–your credit score can suffer greatly.

The lower your credit utilization ratio is, the better. We strongly recommend you try to use less than 30% of your credit limit at all times. That way, you can be sure that whenever the issuer reports your account’s status to the credit bureaus, your balance won’t be too close to your limit.

Make Your Payments on Time, Every Time

If there’s one thing you should take away from this blog post, it’s this: make your credit card payments on time every month!

An easy way to do this is to ensure that you only charge what you can afford immediately—that way, you can pay your credit card bills off in full each month. Even if you fall a little short of your full balance one month, make sure to pay your minimum payment before your due date.

To ensure that you never miss a payment, we strongly encourage first time credit card users to set up automatic payments for at least the minimum payment every month.

Review Your Credit Card Bill Frequently

This tip is crucial. When you review your credit card statements on a weekly (or even a daily) basis, you’ll be able to report unauthorized credit card charges and avoid being overcharged. In addition, if you review your credit card bill often, you’ll be able to see patterns of your spending habits, which can help with keeping yourself accountable to your budgeting plan.

Don't Be Afraid to Actually Use Your Credit Card

Keeping a $0 balance on your credit card won’t do you (or your credit score) any good. Think about it this way–lenders and credit card issuers need to see how you use credit to give you a proper credit score. In addition, using your credit card will make sure that lenders will prevent closing your account.

The Bottom Line

Maintaining healthy habits when it comes to your credit card is no small task, but it is crucial to building and preserving your credit score. At RMLEFCU, we’re committed to ensuring that our members make the best decisions when it comes to their credit —that’s why we offer our Classic Visa Card to set first time credit card users up for success. With this card, you can enjoy low APR rates, easily track where your money goes, and be covered should your card get lost or stolen.

Have any questions? Ask an RMLEFCU representative for more details at (303) 458-6660.