A quick guide to shopping with a credit card for the first time

Quick insights

Applying for your first credit card can be an exciting step in your financial journey. It may make you feel more financially independent and better equipped to handle unexpected expenses. Plus, with some cards, you may be eligible to earn rewards or welcome bonus offers on qualifying purchases.

However, credit cards—like every payment method—have potential drawbacks. Developing smart spending habits may help you avoid some pitfalls like overspending or accruing interest.

Here are some things to know about using credit cards for purchases, including a few tips for using them, along with some pros and cons.

Tips for making purchases with credit cards

Here are some tips first-time credit card users may want to consider:

4 Benefits of shopping with a credit card

Purchasing items with a credit card can offer advantages, especially if you already have good spending habits in place.

Here are some of the potential benefits of using credit cards.

1. Rewards

If you have a rewards credit card, you could potentially earn cash back, points or miles for every qualifying dollar you spend. These credit cards enable cardmembers to earn rewards at a flat rate or at an accelerated rate in select spending categories, such as travel or dining. Some cards might offer both. For instance, a credit card may offer a flat earn rate of 1% cash back on every purchase, as well as 3% cash back on dining purchases.

Rewards credit cards might enable you to earn on the purchases you were planning to make, but it’s generally not recommended to make purchases with these cards solely to earn points.

2. Streamlined payment process

Credit cards are widely accepted in many locations. It’s typically quick to make a purchase, especially if the vendor is equipped to accept tap to pay.

Credit cards are slim and lightweight, fitting easily in your wallet or pocket, which may make them appealing for both everyday use and travel. They can reduce the need to carry cash.

3. The ability to make large or unexpected purchases

Credit cards can be helpful tools for managing large expenses like urgent car repairs or new furniture. They could potentially help you manage your finances as long as you keep your repayment capability in mind.

4. Protections

Many credit cards have features to help protect your personal and account information and help prevent unauthorized purchases. With some credit cards, you can enable features like two-factor authentication for online purchases and alerts to monitor spending in real time.

While the cardmember can also take additional steps to protect their credit card information, these features may give you peace of mind when making purchases with your card.

Some credit cards come with additional protections, including travel protection benefits. This coverage might help you get reimbursed for eligible expenses if certain unexpected events occur during a trip.

4 Potential cons of shopping with a credit card

Credit cards can have downsides, many of which can be mitigated by managing your finances effectively.

Here are some potential cons of making purchases with a credit card:

1. Overspending

Credit cards can streamline the payment process, but a potential downside is that you may feel tempted to make impulse purchases or overspend. Some people feel more detached from their spending when they use credit cards. When you have to physically hand over cash, you may feel more aware of your spending and feel a stronger sense of value.

Managing your credit card effectively and practicing mindful spending habits may help prevent overspending.

2. Interest charges

Credit cards often have high interest rates and these rates are generally—though not always—higher than those for loans.

If you carry a balance month to month on your credit card account, you’ll accrue interest, which can quickly add up. That’s why it’s usually beneficial to have a plan to pay back any purchases you make.

To avoid incurring interest, it is generally recommended to pay off your credit card balance in full by the due date each month.

3. Fees

Credit cards have fee structures outlined in their terms. For example, you might be charged late fees if you don’t make the minimum payment by the due date listed on your credit card statement. There may also be a fee if your payment is returned.

Some credit cards charge an annual fee to use the card as well as foreign transaction fees when using the card abroad.

To minimize fees, you may want to consider cards that charge low annual fees or don’t charge foreign transaction fees. You could potentially avoid late fees by automating credit card payments so at least the minimum balance is paid by the due date every month. It may also be helpful to familiarize yourself with the credit card’s terms so that you understand the fee structure.

4. More accounts to track

Having multiple accounts may add complexity to your finances. To manage your finances effectively, you may want to consider keeping track of the balance, transactions and due dates for each account you hold.

You may find it easier to manage a credit card account if you create a budget and automate monthly payments. Additionally, opening a credit card from the same bank where you have other accounts may help simplify your finances as you can monitor your financial activity all in one place.

In summary

Credit cards can be an efficient payment method and might offer benefits like rewards, the ability to pay for large purchases and certain security tools. Some drawbacks include interest charges, fees, more complicated finances and the risk of overspending.

Knowing the card’s terms, creating a budget, automating payments and tracking account activity through the bank’s app are a few ways to help minimize the drawbacks and maximize the benefits.