A Guide for Credit Card Newbies

How to avoid carrying a balance, over-limit fees, late payments, and other credit-damaging behaviors.

Young woman using her digital tablet and credit card to bring joy to the world
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However, cards that offer attractive rewards pose risks, according to Gerri Detweiler, director of consumer education at Credit.com. "I wouldn't focus on rewards for your first card, only because it's so tempting to start using the card for everything and then end up with a balance that you can't pay off," she says.

[Read: What's a Good First Credit Card to Build My Credit Score?]

Live within your means. Typically, a first-timer is given a credit line of $500 to $2,500. While those limits sound high to some, a number of teenagers quickly reach their threshold within a given month—and want to continue using the card before the next billing cycle. Fortunately, the CARD Act offers an added protection for consumers: Only people who enroll in over-limit fees can use more credit than they're allotted. By agreeing to allow over-limit fees—charges (typically ranging from $15 to $40) that are applied with each purchase made after the user has hit their credit limit—cardholders put themselves at risk of losing money.

Nonetheless, a large number of teenagers continue to opt in for over-limit fees. "It's my belief that embarrassment has a price," says Ulzheimer. "It's a pride issue. People don't like being declined, especially in front of a group of their friends." Although no one likes the prospect of seeing their card declined, over-limit fees aren't worth it.

Monitor activity. It's arguably the most basic step to responsibly using a credit card, but many first-timers don't check their card activity—or, at least not as often as they should. To stay on top of things, Detweiler suggests signing up for mobile or email alerts notifying you every time the card is used. Those who prefer to monitor less frequently should check their account every other day, says Ulzheimer, adding it only takes a couple minutes.

Furthermore, a large proportion of the 10 million Americans who fall victim to identity theft each year have their personal information stolen through their credit card usage. Although small purchases won't drastically raise your bills, Hardekopf says both low and high transactions are worth scanning when looking for warning signs of identity theft. "There are countless stories of identity thieves who get your credit card number and start out with a small purchase under $10, just to see if it goes through. Then, when it goes through, they'll buy a bunch of other stuff," he explains.

Pay it off each month. Making the minimum payment doesn't cut it. If you carry a balance, the card quickly becomes your enemy—slapping your remaining debt with a nasty interest rate. Detweiler says it's a bad habit made by many credit card users—not just first-timers. "It's called a minimum payment, but making minimum installments from month to month crushes your finances," she says. She says many consumers don't understand if they carry over an amount, new transactions start accruing interest immediately. In the event you carry a balance, Detweiler recommends holding off on using the card until you can get it paid off; otherwise, "you'll be paying more for everything you buy."

Watch how much credit you're using. While paying off the full balance each billing cycle is crucial, credit card users should try to keep their balance under about 25 percent throughout the month. This will keep your credit utilization ratio—a large factor in how credit scores are calculated—in a healthy range. Detweiler points out this can become an issue for many college students who use their credit card to pay for textbooks. "Using 90 percent of a $1,000 credit line, even if it's to buy books, looks just as bad as using 90 percent of a $10,000 credit line," she says.

[See Basic Money Lessons You (Probably) Missed in High School.]

The bottom line: Like learning how to ride a bike, tie your shoelaces, or drive a car, Ulzheimer says learning how to use credit takes practice. Still, first-timers can position themselves for success if they go into the process knowing what makes for a responsible credit card user.