Things you probably shouldn't put on a credit card:
- Long-term debt
- Utilities, rent, and mortgages
- Lottery tickets, bets, and money orders
Long-term debt: The vast majority of your everyday purchases can be bought with credit, no problem. However, some things simply shouldn't be put on plastic. For instance, your credit card is a poor place to put long-term debt -- that's what loans are for.
Processing fees: Many companies charge credit card processing fees. Think twice before using your credit card on utility bills, rent, or mortgage payments. These fees can tack an extra 2% to 3% onto your bill.
Cash advances: First-time credit card users should also note that purchases that could be considered a cash equivalent -- such as lottery tickets, bets, or money orders -- are often treated as cash advances by your credit card company. Cash advances come with transaction fees and start accruing interest the second they hit your account.
MORE INFO: See Motley Fool Money's guide on whether you can buy lottery tickets with credit cards.
5. Choose your cards carefully
First-time credit card users can be lured in by sign-up bonuses and the prospect of big rewards, but every card has its fine print. Read carefully.
Some stores offer store credit cards at checkout. They're tempting; after all, who doesn't want to save $20 on a store purchase today? But there's a catch: store credit cards tend to have astronomical interest rates. Plus, most store cards -- and their rewards -- can only be used to make purchases at those stores.
For your first credit card, you'll have limited options. Student credit cards offer students good rewards. If you're not a college student, consider a secured credit card. Secured cards are just like any other credit card except they require a fully refundable deposit to open. Some secured cards even offer purchase rewards.
First-time credit card users should limit how many new cards they open. Opening a new credit card has a credit score implications. Simply applying for a new card adds a hard inquiry to your credit report, which can drop your score by a few points. Each account you open shortens your average account age and may drop your score.
6. Beware of fees
You can see all the fees charged by your credit card by reading your cardholder agreement -- fees usually get an entire page.
First-time credit card users may understand annual fees (how much you pay yearly to keep your account open) and interest fees. But your card issuer may charge other fees, too.
Late fees are extremely common. You'll pay them if you ever make a late payment.
One thing first-time credit card users may not realize is that certain types of transactions charge special fees. Credit card users typically pay fees for balance transfers. Cash advances ding card holders. Many cards charge for making purchases abroad.
7. Check your statements monthly
Each month, you'll receive a credit card bill. First-time credit card users may be tempted to simply eyeball the balance and chuck the card statement in the bin. Albeit satisfying, this isn't the smart move. Instead, consider taking a full minute to review charges.
Do you recognize every charge? If you spot weird charges, let your card issuer know. You may have been robbed by an identity thief posing as you.
Fraudulent charges on credit cards are not uncommon, so be on the lookout. Even a tiny unauthorized charge -- $0.02, say -- should be reported. The crook may be testing your card to see if it works before they scam you big time.
Reporting fraudulent purchases does two things. It helps the issuer stop the fraud and prevents you from paying for things you didn't buy. Legally, you're on the hook for up to $50 in unauthorized purchases. More likely, though, your issuer has a $0 fraud liability policy that means you won't pay for anything you didn't purchase.
8. Check your credit reports yearly
In the financial world, having good credit is important. Lenders of all types look at your credit reports when deciding whether to offer you credit cards, loans, and mortgages.
In the U.S., you get credit reports from three major credit bureaus: Equifax, Experian, and TransUnion. Your credit report contains details about your debts, your repayment history, and your current credit accounts -- including your credit cards.
Most first-time credit card users have limited credit history, so there won't be much to review. But check your credit reports at least once a year to ensure everything is correct.
You're entitled to a free copy of your credit report every year from each of the three main credit agencies -- visit AnnualCreditReport.com to order yours. If you find anything that doesn't look right, head to the credit bureau's website or call them to file a dispute. Your score could go up.
Checking your credit reports won't hurt your credit scores. That's a myth that, unfortunately, makes its way to a lot of first-time credit card users.
9. Keep an eye on your credit scores for red flags
Small five to 10 point changes in your credit score are completely normal, especially for first-time users building credit. As your credit balances change, your score will, too.
Do you see a huge change in your credit score? Something big just happened on your credit reports, and it's worth noting.
If you sign up for a new credit card, take out a loan, or close an old account, a bigger credit score change is normal. But if you haven't made any dramatic changes to your finances and your credit score changes big-time, check your report.
These days, it's remarkably easy to keep an eye on your credit scores. The simplest way for first-time credit card users to track credit scores is via their issuer. Most credit card issuers now offer free score tracking, plus score alerts and monitoring on a single dashboard.
10. Ask your issuer for help
One mistake first-time credit card users make is not speaking up when they're in trouble. Credit card contracts are full of terms and conditions and fine print, but they can be more flexible than they appear. If you know you can't pay your credit card bill, call your issuer and ask for help.
It's in everyone's best interest -- yours and the issuer's -- for you to repay your credit card debt. The best plan is to call your issuer before you fall behind. It may offer you an extension or a payment plan that skips late fees or excess interest. Work with your issuer to keep your credit score in good health.
Swipe smart, not hard
Learning the ins and outs of credit can be challenging for first-time credit card users, but it's hardly impossible. With a little bit of study, you can go from credit noob to credit card pro, well on your way to a life of good credit (and cheap loans).
Building credit is a long-term game. You won't have excellent credit overnight; it can take years to build up a credit history worthy of a high credit score. But that effort pays off when you enjoy quick approvals and low interest rates on cards, mortgages, and common loans.
