7 tips for first-time credit card users

If you’re new to credit cards, you may be surprised to learn that you can start your credit journey at 18 years old — the minimum age requirement for opening your first card.

While financial experts recommend you start building credit as young as possible, not all beginners are the same. Below, CNBC Select rounds up seven (perhaps surprising) tips for newbies no matter how old you are.

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Credit cards work by issuing you a line of credit to use to make purchases. You are then required to repay the loan — ideally in full at the end of each billing cycle so you don’t accrue interest. But because you are just starting out, credit card issuers prefer to have a way to pay back your credit line until you prove a history of trustworthiness.

Until credit newbies can get a regular (or unsecured) credit card card, they start with a secured card.  

The two types of cards are nearly identical, but with a secured card, you must make a minimum deposit (known as a security deposit) to receive your credit limit. Secured credit cards are geared toward those with limited or no credit history. Since your limit is equal to the amount of money you deposit, which typically starts at $200 and goes up to a specific cap, they help you learn how to get in the habit of borrowing and paying back. They are a good way to establish credit and can help raise your credit score.

There are a handful of good options when it comes to the best secured credit cards out there, but CNBC Select ranked the Discover it® Secured Credit Card as a top starter card because cardholders can earn cash back, receive a generous welcome bonus, use the card overseas without incurring added fees and more — all for no annual fee.

Credit card issuers are required by law to disclose on their website any interest rates and fees, such as annual fees and foreign transaction fees. Before you decide what to sign up for, you’ll want to take full advantage of this information and learn the ins and outs of any card that catches your interest.

There are a handful of no-annual-fee credit cards out there, which are usually a good starting point for your first regular credit card.

Keep in mind that every time you apply for a credit card and a lender checks your credit, it will be noted as a hard inquiry on your credit report. These hard inquiries can ding your credit score by a few points so it’s worth doing your homework so that you reserve your hard inquiries for only the cards you actually want.

And if you’re in school or planning to go back, college student credit cards are a smart choice for students looking to establish credit. These cards are specifically geared to students and typically offer lower credit limits, which is good for anyone just getting started. And with the Discover it® Student Cash Back, students can still earn cash back and enjoy an introductory APR period.

You may have felt intimidated by credit cards’ high interest rates, also known as APRs, but as long as you pay your credit card bill on time and in full, you won’t ever have to pay them.

This is because many credit cards offer a grace period, which is the period of time between the end of a billing cycle and when your bill is due. During a grace period, you may not be charged interest on your balance — as long as you pay it off by the due date.

Grace periods vary by card issuer, but must be a minimum of 21 days from the end of a billing cycle. For example, if your billing cycle ends on the first of each month and your bill is due on the 22nd of the month, your grace period is 21 days. If you happen to carry a portion of your balance over to the next month, interest will begin accruing.

Enrolling in autopay is an easy way to make sure you never miss a credit card payment, but we know that sometimes mistakes happen. While you still may get a penalty APR, you can consider a credit card that has no late payment fees ever, like the Citi Simplicity® Card.

Spending below your credit limit is essential for reaching a good credit score. The rule of thumb is to not spend more than 30% of your credit limit (some experts even suggest having a 10% threshold). This percentage is a common credit card term called your credit utilization rate.

Your utilization rate is a ratio that measures how much credit you are using compared to how much you have available. The calculation looks at both your credit card balance and your credit card limit.

For example, if your current balance is $2,000 and you have a $5,000 limit, that makes your credit utilization rate 40%.

($2,000 / $5,000 = 0.4 X 100 = 40%)

Credit cards designed for those just starting out may have low limits, but once you get other cards and your overall limit grows, you will want to pay closer attention to your credit utilization rate and be sure to spend wisely.

As your credit card usage goes up over time and you try to maintain a low utilization rate, consider asking for a credit limit increase as long as you are confident you won’t overspend. You can also pay down your bill multiple times a month, or even as soon as you swipe it, to keep your balance low.

It’s important to report unauthorized credit card charges as immediately as you can so you aren’t overcharged, but you are already much more secure with a credit card than you would be using a debit card when it comes to fraud liability.

Whereas you could be fully liable if someone steals your debit card information, with credit cards, most issuers offer 24-hour fraud protection and identity theft assistance so they are there to cover you for fraudulent charges. And, according to federal law, the most you could ever be liable for with a fraudulent credit card charge is $50.

Make it a routine to pay attention to your credit card bill. Seeing your spending habits may help motivate you to make a fun routine out of budgeting, as well. 

Keeping a $0 balance on your credit card won’t do you (or your credit score) any good. Lenders and credit card issuers want to see how you use credit so it’s important to make purchases on your credit card, plus keeping it active will prevent your issuer from closing it on you.

While you want to keep your credit utilization lower than 30%, you also want to be sure you are using your card to its fullest benefit.

Your first credit card will have a big impact on your credit history. And as long as you use it responsibly, that impact can be very positive. Credit cards not only let you afford the basics, like everyday expenses, but they can earn you rewards when you charge and help you qualify for lower interest rates on loans.

Canceling your credit card can be harmful to your credit score, especially if it’s your oldest card. It will bring down the average age of your account, but perhaps more importantly it will decrease your overall credit limit, which is one of the most important factors in calculating your credit score. 

While there are scenarios where it may make sense to close a credit card, such as if you’re paying an annual fee on a card you no longer use or you are incurring a high interest rate, you should check first how your credit score will be affected. You can use online score simulators, such as CreditWise® from Capital One, to help you make the most informed decision.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit card article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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For rates and fees of the Discover it® Student Cash Back, click here.

For rates and fees of the Discover it® Secured Credit Card, click here.