Getting your first credit card can be a liberating experience. It means carrying less cash and paying for things more conveniently. More importantly, it’s a vital stepping stone for building credit.

Of course, using this new power brings a new set of responsibilities. Misusing a credit card may present more problems than advantages.

Whether you’ve just been added as an authorized user or received a new card on your own, it never hurts to cover the basics. Here’s what you need to know about a credit card before activating it.

1) Treat Your Credit Card Like It’s Part of Your Budget

One of the most valuable things to remember as a new cardholder is adopting the proper mindset. Bankrate says it best: treat your credit card like a debit card. Or to put it another way, only use your credit card when you have money in the bank to cover expenses.

Set a budget beforehand and stick with it. Then, instead of using your debit card or cash, use your credit card. This allows you to reap the benefits of your credit card while still having the money to pay off the balance.

Only use your credit card for planned purchases and have it complement your budget. When you set limits, you are less likely to carry an outstanding balance and incur interest charges.

For more information on how to use your credit card, refer to our primer on sustainable credit card use.

2) Remember What Affects Your Credit Score and Use It Accordingly

One of the primary reasons to obtain a credit card is to establish or build credit. It’s the foundation that proves to credit bureaus and lending institutions that you can be trusted with paying off a car or taking out a mortgage. In some cases, you may also need a good credit score to rent a house or apartment.

You can set yourself up for success by being mindful of the following:

• Never carry a balance that’s over 30% of your credit limit. The credit utilization ratio is the total amount of credit you’re using divided by the total credit available to you. Lenders use this data to gauge an individual's ability to manage debt, and they typically prefer a ratio of no higher than 30%.

  When getting your first card, take note of your credit limit, then multiply it by 0.3. The resulting number is what your balance shouldn’t exceed by the end of the billing period. So if you have a credit limit of $1,000, you can think of your “budget” as $300.

  You can always ask your lending institution to increase your credit limit, but for now, focus on the basics. You can also pay off portions of your balance during the billing period to keep your utilization ratio in check.

• Always pay your credit card bill on time. Next to the credit utilization ratio, credit bureaus heavily weigh your payment history. You’re trying to prove you can pay back debts, after all, so get in the habit of making payments every time your statement drops.
  

Pay the minimum amount due, at the very least. However, it is always advisable to pay off the entire balance whenever possible. Anything you don’t pay off will incur an interest charge, which is a percentage of the remaining balance that gets added to your outstanding balance.

If you’re late on a payment, your card issuer may also charge a penalty fee or even raise your interest rate. Failing to make payments on time will negatively impact your credit score.

3) Start Small, Then Build From There

Using a new credit card can be a little intimidating, especially for first-time users. If your initial credit limit is very low, “charging it” can feel more than a little restrictive.

Instead of letting your card collect dust in your pocketbook, simply start small. NerdWallet has a great starter strategy as you wait to apply for a higher limit.

Give your credit card a dedicated purpose. In other words, use the card for specific things first. Small, manageable purchases set the stage for a solid credit history. Some recommended categories include:

• Gas
• Groceries
• Subscriptions
• Streaming Services
  

As you become more comfortable managing your balance and paying bills regularly, you can gradually diversify your purchases.

Your credit card is a tool that can help you reach your goals. By adopting good habits, it is possible to establish a strong credit history and lay the groundwork for a financially stable future.

First Florida is your partner in sharpening your financial literacy skills. For more tips on improving your credit and budgeting skills, check out more of our Featured Articles.