If you recently transitioned to adulthood, applying for a credit card is probably among the top five things you look forward to. In most countries, a person is eligible to obtain a personal credit card as soon as they turn 18. Credit cards add convenience to life, and are the preliminary means to start building credit. The shiny plastic unlocks so many possibilities, and they can make you feel invincible, which is addictive. Despite the many perks credit cards have to offer, they can become a liability if not used responsibly. Many newbies exploit their credit privileges, and then suffer long term consequences.

It is necessary to do your research and understand the obligations of owning a credit card before you get one. You can get multiple lines of credit, but beginners must start with one and keep it that way until they get the hang of it. If you have recently received your first credit card or plan to apply for it soon, the following tips will help you prevent a disastrous debt situation.

1. Curb your Excitement and Learn the Basics

Getting your very first credit card is indeed a milestone, but better not go all out on celebrations. You have a lot to learn about credit usage and debt management, so be prudent.  Many young users treat credit cards like free money, which is a costly mistake. Credit cards are more of an emergency fund, and whatever you charge on them has to be paid back shortly with interest. It is best to stick to your debit card for day-to-day purchases, and reserve your credit limit for rainy days. For example, many people living from paycheck to paycheck exhaust their monthly income before the end of the month; under these circumstances, credit cards can be used for buying essentials or paying bills that are due by the end of the month.

If you don’t want to be deprived of your credit privileges anytime soon, and you are hoping to efficiently build a remarkable credit score, establish a budget. Your monthly budget should never exceed the sum of your monthly wages (after subtraction of taxes and miscellaneous deductions).  If you have plans to purchase real estate or make another big investment in a few years, you cannot afford to screw up at the beginning of your credit building journey.

2. Shop around before finalizing your first Credit Card

You cannot trust any random credit card provider and sign up for the first package they suggest. Everyone’s financial needs and priorities are different, so you need to find a credit card program that puts you first and addresses your unique requirements. Every time you apply for a card and the issuer checks your credit score, it will be noted as a hard enquiry; each hard enquiry can lower your score a few points, so reserve them for the card/cards you actually want.

Some credit cards have no annual fees, which is ideal for beginners. However, others having a yearlycharge might provide benefits that you prefer, and hence could be worth the added expense. Look for the lowest interest rates and check for a rewards system that might interest you. If you are a student, it is recommended to settle for a card with the lowest limit because they are easier to manage on a limited budget. Some credit card companies try to lure in consumers with sign-in bonuses, but if you read the fine print, you’ll know it’s a trap. It is crucial to read (and understand) all the terms and conditions before committing.

3. Pay your Bills on Time in Full

If you pay all your bills by the due date in full, you shall never have to worry about crippling debt, or find yourself in a difficult situation where the only way out is to file Chapter 7 bankruptcy. Timely payment of bills is the fastest way to build credit and avoid interest fees. Credit card companies allow card holders to make a minimum payment, which is a small percentage of the outstanding balance. Many inexperienced credit users think that this is great, since they get to pay off debt in miniscule installments over an extended period; they don’t realize that the smaller the installment, the greater is the interest rate levied upon it.

Even though writing off the minimum every month sounds convenient, in reality you end up paying a lot more than you originally owed (sometimes double the actual amount). Most credit cards come with a ‘grace period’, i.e. the time between the statement closing and bill payment deadline. The grace period typically lasts 21 days, depending on the policy of your card issuer. If you pay your bill in full before the deadline, you are not charged with interest. The portion of your balance carried off to the next month will accrue interest.

4. Never Max Out

The rule of thumb is to never spend more than 30% of your credit card limit; even better if you can lower your limit to 10%.This is an essential step to building credit and maintaining a good score. Your first card will have a low limit to begin with, but it gets tricky once you acquire additional lines of credit and your overall limit increases. Maxing out your credit card is a bad idea and may potentially ruin your finances. For starters, maxing out your credit card signifies that you are struggling to make ends meet, i.e. you are using your credit for everything, as opposed to emergency purchases.

Once your available credit is exhausted, you cannot charge anything on it until the next cycle. If you are making the minimum payment each cycle, you will be accumulating massive debt over time. You shall eventually reach a point of no return and your credit score will hit rock bottom. If you apply for a new loan or credit, you are likely to face rejection due to your poor credit history; if you get approved, you will be subject to extravagant interest rates that would further deteriorate your financial position.

5. Review your Statements for errors

Reviewing your credit card charges every time and double checking your bills is a useful practice. This routine will enable you to recognize your spending habits and discover possible fraud. If you have been overcharged or notice an unauthorized purchase, report it to the service provider immediately. Even though credit cards are a highly secure payment method, identity theft and technical errors occur occasionally. Unlike with debit cards, users are rarely held liable for fraudulent activity on a credit card. Most credit issuers will compensate you in full, as long as the fraudulent charge is reported within 24 hours.

6. Avoid Paying Interest as much as possible

Money problems are commonplace, and can happen to the best of us. Even the most frugal and responsible consumers fall behind on payments sometimes. You may have incurred some unanticipated expenses that forced you to spend beyond your budget or max out available credit. You have until the end of the grace period to make up for the outstanding dues. If possible, take out some money from a savings account, liquidate an asset, or borrow from a loved one whom you can pay back at your convenience.

If none of the mentioned options are available, the dues will move on to the next cycle and become subject to interest. When this happens, opt for the fastest repayment method rather than settling for the minimum percentage scheme. For example, if you pay off 25% of your total debt every following month, you will be done within four months whilst paying a small percentage interest. On the other hand, if you pay 5% every month, you’ll be stuck with the debt for nearly 2 years and pay a lot more in interest.

7. Keep Track of your Credit Score

Earning a good credit score is of utmost importance because lenders review your credit history before approving you for a loan. Your credit report enlists your active credit accounts, payment history, and debt details. New credit users with a single credit card have limited activity in the beginning; nonetheless, it is fundamental to make sure that the info provided is free of mistakes. Consumers get one free credit report every year, so you should thoroughly review it at least once a year. Misinformation or errors in the credit report can hurt your score, so immediately file a complaint if you discover discrepancies.

8. Don’t be afraid to swipe your Card

What you hear from peers and read on the internet about credit card usage may have raised concerns. Many people are afraid to make their first purchase from a credit card long after acquiring it. It is true that you won’t accumulate debt or encounter interest if you never swipe your card, but you won’t be able to build credit either. If you want to be able to take out a loan one day or qualify for a mortgage, you cannot do so without a credit history and score. Using credit does not have to be complicated; just follow the rules and stick to your budget.

9. Don’t let Rewards go to waste

Most credit card companies offer some reward system that allow you to earn points on purchases, which can be redeemed later. You may qualify to claim discounts from specific retailers, earn cash back, or get travel points that translate to cheaper air fare. It’s a good thing if you reviewed the reward system while signing up for the card, though it is not unusual to forget about it afterwards. There are deadlines for availing promotions and cashing in points, so keep track and don’t miss out on these benefits.

10. Contact the service provider for help

If you are facing any problem with your credit card, you should refer to the service provider without hesitation. Your friends and family members using a different service provider or plan will not be able to help you out. It is common of new credit users to struggle with credit and debt management in the beginning. If you have accidently missed a deadline and received a penalty, you can explain it to the issuer and request for some concession. Most credit providers are willing to accommodate new users, as long as they ask politely.