Career Advice - A Community Blog

Erik Larson writes about the job market, resume improvement, and career advice

A Beginner's Guide to Using a Credit Card

Written by Erik Larson, Community Blogger | Dec 11, 2017 11:25 PM

For someone who is new to using credit cards, the day that little plastic rectangle arrives in the mail is exciting. A credit card is a powerful financial tool that opens doors. It makes borrowing money easy, and the card can be used online or in brick-and-mortar stores. A credit card is a useful backup in case of emergency. Credit cards can be a way to build a stellar credit rating.

Before you rush out to the shopping center to try out your new credit card, think carefully. Along with the benefits, credit cards come with the potential to create problems if used carelessly. The ease of use also means you can quickly run up substantial debt, and interest charges can be expensive. A missed payment or two will damage your credit rating for years. The key to using credit cards is to be sure to use them responsibly.

How Credit Cards Work

A credit card is a type of revolving line of credit account. The card provider agrees to lend you money up to a specified dollar limit. You borrow only what you need by making purchases. Interest is added to the balance of the account each month, and you must make a monthly minimum payment based on the balance. As long as you make at least the minimum payment on time, the account can remain active for decades. 

Financial experts say that you should pay the entire balance due each month whenever possible. This keeps interest charges to a minimum. In fact, some of the best credit cards won't charge interest if the outstanding balance is paid off each month. Paying the balance each month also keeps you from building up a substantial debt and incurring higher minimum payments.

Building Credit with Credit Cards

Credit card issuers normally update the information on your credit history with the major credit reporting agencies each month. This can have a huge impact on your credit score. Here's why:

  • Making payments on time counts for 35 percent of your credit score. A single missed payment stays on your credit report for seven years.
  • The amount that you owe as a percentage of your credit limit is called credit utilization. This counts for another 30 percent. The lower you keep the account balance, the more it helps your credit score.
  • The length of time your account has been open with a good payment record counts for up to 15 percent.


Even if you don't have any other credit accounts, you can take advantage of the way credit cards are reported to build a top-notch credit score. This will open the door to getting other types of credit like car loans and mortgages. People with the best scores also get the lowest interest rates.

Keeping Credit Card Information Safe.

There are a deplorable number of criminals who may try to steal your credit card information. Some use sophisticated RFID scanners to capture information right off of credit cards. You can prevent this by purchasing a RFID shield or jamming device. Alternatively, you can stop illegal scans by wrapping cards in aluminum foil. Here are some other precautions to take:

  • Never give credit card information over the phone or online unless you know the other party is a reputable business.
  • Check your credit report and credit card statement regularly. Report unauthorized charges to the credit card company immediately.
  • Keep your information secure by shredding statements after you have checked them each month.
  • Never let a clerk take your card out of your sight when making a purchase.
  • Report lost or stolen cards to the card issuer right away. This limits your liability for unauthorized charges.

Tips for Managing Your Credit Card

Keep the balance on your credit card to no more than 30 percent of the credit limit to avoid a high utilization rate. Again, pay the balance each month if you can. Don't close a long-standing credit card account even if you don't plan to use it in the future. That long record of timely payments pumps up your credit score. Contact the credit card issuer if you run into financial trouble. Even if you can't make a payment on time, many issuers will not report a rare delinquent payment provided you make a good faith effort to get caught up.

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