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Bottom Line Up Front

  • From missing payments to taking out cash advances, it’s easy to make mistakes when you’re first starting out with a credit card.
  • Using your credit card the right way is key to staying out of debt and protecting your credit score.

Time to Read

4 minutes

May 2, 2022

When you’re out on your own, it’s you making the calls. Do you want to cook tonight or order a pizza? Should you hit the gym or take a night off to hang out with friends? But keep in mind, the bad choices will catch up with you. The same holds true for your credit decisions. And those bad choices can stick with you for years to come, particularly as a first-time credit user when you are trying to build credit. Poor credit use and failed payment history on credit card accounts could make it hard to land a good job or even qualify for your first home. Here’s what you need to know about credit to get you started on the right foot. Avoid making these common credit mistakes now so you won’t kick yourself later.

Use Credit Responsibly and Choose the Right Card

As a young adult with little or no credit history, you'll want to look for a credit card that fits you best. Always examine the costs of any credit offers you receive, including annual fees and Annual Percentage Rates (APR). Consider using a prepaid card to track your expenses while waiting for the right time to open your first credit account. This practice of “using plastic” can help prevent future credit card mistakes.

Only Put on the Card What You Can Pay Off Each Month

Getting behind on credit card bills makes catching up difficult as interest fees stack up. A good rule of thumb: Only use your card for expenses that you know you can pay off when bills are due. Missed payments, late payments and failure to make more than minimum payments can be incredibly expensive, and they may directly affect your personal finances and credit history.

Video Transcript for Credit card mistakes that can hold you back

(DESCRIPTION)
Bryan, a Navy Federal Credit Union Employee, holding a large blue scrapbook, labeled “Amber’s Baby Book.”
He lowers it to look straight at the camera.

Then, Amber, another Navy Federal Employee, snatches the scrapbook out of his hands.

(SPEECH)
BRYAN: Hey, I was just getting into that.
What’s it for, anyways?

(DESCRIPTION)
Amber sits down at her desk and looks at the open scrapbook.

(SPEECH)
AMBER: Just a keepsake.
I like to remember how far I’ve come from my early days of using a credit card.

(DESCRIPTION)
She points at a blue Navy Federal Credit Union credit card displayed in the scrapbook.

(SPEECH)
AMBER: This was my first one ever.
I didn’t have credit, so I had to build it.
A secured card was my way in.
I just deposited a couple hundred bucks on the card and it became my line of credit.

But when I graduated to an unsecured card, it felt like free money, and I only paid the minimum payment each month.

(DESCRIPTION)
Bryan looks confused.

(SPEECH)
AMBER: I was just a baby, Bryan.

Anyway, I’m Amber, your credit card connoisseur at Navy Federal.
Learn from my credit mistakes and some hacks that helped me along the way.

(DESCRIPTION)
Logo. Navy Federal Credit Union.
Making Cents.

Title:
Credit Cards: Real Hacks and Real Mistakes

(SPEECH)
AMBER: My first mistake?
Maxing out cards.

When I got an unsecured credit card, how was I supposed to know I should keep credit utilization low for a better credit score?

But that just led to another problem—paying the minimum balance.
Thing is, I didn’t actually have all the money I’d spent on my card.
I was racking up interest on my crazy balance and it was adding up fast.

That’s another mistake—interest rates.
It’s smart to get a card with a nice promo rate on purchases and balance transfers, sure, but you’ve got to pay attention to when that ends.

Check the booklet that comes with your card for your annual percentage rate, or APR.
When that intro rate ends, resist the urge to close out your card.

Your oldest credit cards may go out of style, but good credit is timeless.
Closing out that card could shorten your credit history, which can hurt your credit score.
If there’s no annual fee, stay put.

(DESCRIPTION)
Amber flips through the pages of the scrapbook, revealing several credit cards and receipts arranged in aesthetically pleasing layouts.

(SPEECH)
BRYAN: Wait, so all these cards are still open?

AMBER: Of course.
Gotta cherish all those good times we had.

Not that we don’t have them now—I’ve learned plenty of credit card hacks as we’ve grown up together that keep the good times rolling.

BRYAN: Oh, I’ve seen these on TV.
Like how you can jimmy open a locked door or scrape your windshield with it in the winter.

AMBER: No.
And nobody should be using a credit card for that anyway, Bryan.

I mean hacks that help you financially.
Here are some of my favorites.

Set‑it‑and‑forget‑it tools like autopay can help you pay off your balance monthly.
Pay that bill in full.
Then you don’t even have to think about that pesky APR number, because there’s no balance left each month to rack up interest.

Oh, and this one is so important—think of your credit card like a debit card.
Only buy what you have money to pay for.
You’ll earn cash back or reward points that way too, if you’ve got a credit card with perks.

(DESCRIPTION)
She points to a green Navy Federal cashRewards credit card displayed in her scrapbook.

(SPEECH)
AMBER: Like I did with this one.

After a while of making smart money choices, request a higher limit from your card issuer—usually by calling or through their app.
It can help keep your credit utilization lower, which can make your credit score higher.
Just don’t be tempted to overspend with that shiny new credit limit.

BRYAN: Man, your scrapbooks are almost as thorough as your spreadsheets.

AMBER: I know, I know—it seems like a lot to keep track of.
But here’s a smart money strategy for you.

Start with a secured credit card to help you build credit.
Your deposit, or collateral, shows your credit card issuer you’re good for the money.
And it’s usually between $200 and $500.
Plus, you can still earn points or cash back.

BRYAN: Wow, where were you when I was applying for my first credit card?

(DESCRIPTION)
She lifts up her scrapbook and shows it to him.

(SPEECH)
AMBER: Figuring it out for myself.

So here’s to making sense of our money together.

BRYAN: Okay, but next time you need to bring in actual baby photos.

AMBER: You gotta call my mom for those, Bryan.

(DESCRIPTION)
Bryan lifts and points his index finger in agreement, then picks up the phone.

(DESCRIPTION)
Credits. Navy Federal Credit Union.
Making cents of your money. Subscribe now.

Navy Federal is insured by NCUA.

This content is intended to provide general information and shouldn’t be considered legal, tax, or financial advice.
It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

Create a Solid Credit History

While it’s important not to get in over your head with credit card debt, you also want to create a positive credit history for your future. If you avoid cards altogether, you might not have any credit history when you need to make important purchases like a home or a car. A good credit history can have a ton of perks and benefits—lower rates on loans, better car insurance rates and rewards like travel or cash back. Just remember to keep your credit use in check to avoid credit card mistakes, which can affect your ability to obtain new credit. 

Maintain Excellent Credit with Free Credit Reports

In the United States, you can obtain your credit report and credit score from three credit bureaus: Experian, Equifax and TransUnion.  AnnualCreditReport.com is also a great source for your free credit report and is authorized by Federal Law.

  • Experian allows you to check your credit report and your FICO score, and best of all, it’s free. It also offers 24/7 credit monitoring, Experian CreditLock (which controls who can access your credit file) and identity theft protection. 
  • Equifax offers personal credit report assistance by providing your credit score. It also monitors your credit and offers identity theft protection products.
  • TransUnion shows your credit score through a detailed report, offering tools to plan your credit use and  identity theft insurance.
  • Knowing your credit score is key to understanding your credit. Through Navy Federal Credit Union's Mission: Credit Confidence® Dashboard, you can monitor your score over time. You can also use the score simulator to see how certain actions could affect your score.

A Tale of Two Students

  • Carissa got a credit card without an annual fee and with a low interest rate when she got a part-time job. She uses her card sensibly for everyday expenses and makes her monthly payments on time.
  • Spencer started using his credit card as soon as he started receiving job offers. He made just the minimum monthly payments and planned to pay off his credit card when he landed a high-paying job.

A year after college

  • Carissa continues to use her credit card wisely and has been able to increase her available credit, improving her credit score as a result. She has no interest in getting close to her available credit limit as she hopes to maintain her credit for the purchase of her dream house.
  • Spencer maxed out his credit cards within a year and was unable to make the minimum monthly payment, often making payments late. Several companies passed on his job applications when they looked at his credit, thinking he may be a risky candidate. 

Ten years down the road

  • Carissa qualified for a great interest rate on her mortgage. She still puts big purchases on her credit card to earn perks and rewards, but she pays off the credit card balance right away or before the monthly payment is due. 
  • Spencer is working but isn’t making the money he expected. He's slowly chipping away at the debt he accumulated early in his career.

 

Next Steps Next Steps

  1. Want a credit card that best suits your lifestyle? Check out our variety of credit cards available for Navy Federal Credit Union members.
  2. If you find yourself scuffling to make your credit card payments on time and in full, consider getting some personal finance counseling for support. We'll help you with a plan to get back on track.

Credit & Debt Resources

View More Credit & Debt Resources

Disclosures

This content is intended to provide general information and should not be considered legal, tax or financial advice. It is always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.