Using A Credit Card: Ultimate Beginners' Guide [2023]

A Beginners’ Guide To Using A Credit Card

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Beginners guide to using a credit card

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Credit cards have been in use since the early 1960s and are a common form of payment, with them being responsible for 467.65 billion purchase transactions in 2020.

Credit cards utilise borrowed money so you can purchase items you can’t immediately afford.

But, that isn’t the only use for a credit card. It can be used to build up your credit report and can offer many financial benefits.

Unfortunately, many of us have never been taught about finances let alone how to utilise a credit card. That lack of knowledge can cost you money and opportunities.

A credit card can increase your financial freedom as you are able to purchase items that you couldn’t.

We have created this handy beginners guide so that way you can make the most out of your credit card and avoid any extra debts that can come from owning one.

Below we have outlined exactly what types of credit cards there are, what a credit score is and how to build it, some top tips for using your credit card, and any jargon you may find in relation to credit.

How Do Credit Cards Work?

How do credit card works

Credit cards are tied to a credit account that is owned by a financial institution like a bank. The money you spend on the credit card is borrowed from the institution.

There is a credit limit to the amount you can spend on the card and you will need to pay all of the money spent back.

Most places accept credit cards but a few don’t accept certain vendors. This will need to be considered when looking into getting a credit card.

Another benefit of using a credit card is that it gives a bit of insurance to a payment. If any fraud charges are found, then you aren’t liable for them and won’t have to pay the extra charge.

Is A Credit Card Right For You?

Is a credit card right for you

While we always recommend getting a credit card, there are some things you might need to consider before getting one.

If you are planning on taking out a loan or applying for a mortgage in the future, then a credit card is almost a must.

Without a credit score (we go further into detail about this later in the article) then it’s harder for you to get a loan or mortgage.

You will also need to consider if you can afford a credit card. While most are free to get, some require an annual fee. Some also determine if you qualify for their cards based on your annual income.

Also, if you don’t pay off the credit card on time then you are also likely to incur interest rates. These are important considerations to take note of to determine if you can afford a credit card.

The final step is to decide which credit card you need. Below we have outlined some of the choices available to you.

Types Of Credit Cards

There are 2 main types of credit cards you will find, secured and unsecured.

A secured credit card involves a cash deposit to be laid down first in order to protect the bank against missed payments.

The deposit is commonly equal to the credit limit and is great for those with no credit history. Once you terminate your credit card, you’ll get the deposit back.

Some credit card companies allow you to change your secured credit card into an unsecured one after a certain time with no missed payments.

Unsecured credit cards are the most common type of credit card you’ll find. There’s no deposit required and you can spend up to a specified limit on the card.

Every month you need to pay back the amount spent, or at least the minimum amount, and roll over the rest of the amount into the next month. This rolled-over amount will be affected by interest rates.

Rewards Credit Cards

Some credit cards offer rewards based on how much you spend on them. This can range from 1-3% of your purchase.

Common rewards include points, cashback, and travel. Points are accrued by the credit card company of which you can then spend on goods.

Cashback rewards offer your money back on your credit card balance or to be used for future purchases. Travel rewards are similar to points but can be used specifically for flights, hire cars, hotels, etc.

We go into further detail about travel rewards later on in this section.

Balance Transfer Credit Cards

These types allow you to transfer debts between credit cards. They will typically offer a low APR rate or interest-free for a limited time.

Student Credit Cards

These cards are designed for students who have a little-to-no credit history. It offers lower limits with also lower interest rates, helping you build your credit score.

In fact, student credit cards have some of the lowest interest rates at 19.93%.

Store / Shopping Credit Cards

Store or shopping credit cards are usually issued through retailers in partnership with a bank and the credit card vendor.

They usually provide discounts or a form of reward when you buy items in their store. Take note that these cards typically have a higher interest rate than the standard credit card.

Business Credit Cards

Business credit cards are used exclusively for business expenses and give owners or employees access to the account.

The limit for this card is based on the company’s credit score rather than an individual.

Miles Credit Cards

Miles credit cards are one of the more attractive types of credit cards because of the rewards they offer.

As you spend money on your credit card, you accrue miles.

These miles can be redeemed for a seat on a flight, either free or at a discounted rate depending on your amount of miles.

The number of miles you need for a free flight can depend on the distance, time of day, and the season. It is up to airlines to determine how many miles a flight requires.

Miles credit cards usually partner with certain airlines, so you can only redeem with them.

There are options that aren’t tied to a certain airline which makes using your miles more flexible – so do check before applying.

Miles can be taken away if items get refunded, you fall behind on payments, or the airline goes bankrupt.

It is important to consistently check your billing statement to ensure you have the correct amount of miles in order to see if any have been taken away.

Checking your miles also protects them from thieves as you get to immediately notify the credit card company if you see anything suspicious.

Debit Vs. Credit Card: What’s The Difference?

Debit vs credit cards

While they look very similar since they are both handheld plastic rectangles, there is a large difference in how credit cards work when compared to debit cards.

As previously mentioned, credit cards allow you to borrow money up to a certain amount and can help to build up your credit score. There is usually a minimum annual income required and an annual fee.

Credit cards also offer rewards for using them.

A debit card is usually issued by a bank and is linked to your bank account.

You can use the funds that you have earnt and it will decline a transaction if you what you’re buying exceeds what you have in your account.

Using a debit card has no impact on your credit score, but you cannot go into debt and will face no interest rates.

How To Find The Right Credit Card For You

How to find the right credit card for you

It can seem like a challenge to get the best credit card for you.

This is where you can use comparison sites to find a credit card that will work for you based on your income, credit score, and the rewards you’re looking for.

There are many credit card vendors such as Visa, Mastercard, and AMEX who all offer different rates and benefits.

A comparison site can help to lay out the basics that they offer but it is always a good idea to do your own research as well.

You need to consider what you are going to do with your credit card, that way you have a reasonable idea about the type of card to apply for and what your credit limit should be.

Consider what you are going to buy with your credit card, this will determine the type you could get.

We recommend purchasing smaller items on a credit card, but some people prefer to use them for larger purchases so they can pay them off over time.

Understanding what you want from a credit card can help to narrow down the many options available to you.

Next, you want to look for a credit card with a low APR. Some will offer low-interest rates during the introductory period, so it’s important to see what it will raise to after that period as well.

You need to know the minimum amount you will need to pay every month, this is usually between 2% and 5%, or $10 to $50. Usually, this information will also mention if there are any additional charges.

Finally, you can look into possible rewards/benefits offered by the card.

If this is your first credit card then it is important that it has no annual fees so that way you can keep it open forever.

Take note that annual fees are usually waived for the first to third years. It can also be waived if you meet the minimum spend or if you call to ask for it to be waived.

What Is APR?

APR stands for Annual Percentage Rate.

This is how much you have to pay annually in interest rates on any outstanding balances. It is also known as the cost to borrow money. You won’t pay interest rates if you make all your payments on time in full.

What Is A Credit Score?

What is credit score

Getting a credit score is probably the most important reason to get a credit card. It is a numerical figure used by lenders to determine if they should give you a loan, mortgage, or service.

This figure is based on your credit history, any previous loans, and how much debt you have. They also consider how you manage your payments.

If you have a high credit score, then there is a lower risk for lenders and they are more likely to accept your loan request.

The average credit score in the US was 714 in 2021, this is considered a relatively good score.

It is important to note that every lender is different and they may have different criteria you have to meet.

If you were denied by one lender, it may be worth going to another one. Just make sure you find out why the first one turned you down so you can fix it if possible.

Don’t see too many lenders as too many credit checks on your credit report in a small amount of time can make lenders hesitant – in fact, doing this reduces your credit score!

Make sure you check your credit score frequently enough to ensure you are on the right track.

What Happens If I Am Late With My Credit Card Payment?

What happens when late payment

Late payments will mean paying interest rates until you pay back the full balance. Some credit card companies may also charge you a late fee.

Not paying your credit card on time can also damage your credit score, affecting you financially in the long run.

How To Build Credit

How to build credit

Building up your credit score is one of the main reasons to own a credit card. You need a good credit score for any large purchases in your life. This could include a home, a flat, or even a car.

Here are some of the best ways you can build up your credit score.

Pay On Time

This is the most efficient way to improve your credit score. It gives you a good payment history and shows that you can be trusted with paying back money.

Ultimately that is what lenders are looking for, that you can pay back any money they give to you.

While you technically only have to pay off the minimum amount, it is better to pay more. Ideally, you want to pay off the full amount every month.

You can set up an automatic payment every month or set a monthly reminder so that way you know that it is all paid off.

Watch Your Fico® Score

A Fico score is the credit score that lenders use most often. This is why it is important to check this specific one often if you are looking into getting a loan.

We recommend every couple of months. Some credit cards have a built-in score tracker for convenience.

Keep Your Balances Low

You do not want to get close to your credit limit. Going past it or close to it can look bad on your credit score.

You want to only use about 30% of your credit limit every month.

Ask For A Credit Limit Increase

After about a year of on-time payments, you can ask them to increase your credit limit.

A higher limit makes it easier to keep your spending under the recommended 30%. Furthermore, you can be more certain that you won’t go over.

Keep Your Account Open

You want to keep your first-ever credit card open forever. This is because the average age of your accounts is taken into consideration when calculating your credit score.

Apply For New Cards Sparingly

As your credit score builds you will become eligible for more credit cards with better benefits. Don’t immediately start applying for all these new cards.

You have to consider what credit cards you can afford and also manage efficiently

Every new credit card you get slightly affects your credit score. So at most you want to get a new one every 6 months to a year.

Top Tips For First Time Credit Card Users

Top tips for first time credit card user

When first starting out your credit card journey it can be hard to wrap your head around how they work. If you don’t use your credit card efficiently then you can end up in more debt.

So, we have included some simple tips you can use when owning your first credit card so that you use it to its full potential.

Set A Budget

Credit card debt is one of the largest risks that come from owning a credit card. This is why you need to set a realistic idea of what you want to spend.

Most people follow the 50/30/20 budget.

This includes 50% going to house necessities like utilities and groceries, 30% going towards what you want instead of need, and 20% being put into your savings.

You don’t have to strictly follow this, if you find a budget plan that works for you then use it.

Keep Track Of Your Purchases

You need to be diligent in your tracking, that way you know exactly what you are spending your money on.

This can ease your mind about going over your spending limit and allows you to stop using your credit card once you reach your limit.

Tracking your spending also teaches you discipline about how you manage your money.


Some issuers may put restrictions on what you can purchase. Common ones include casino gambling and lottery tickets.

You also can’t use your credit card to pay off other loans like student loans or mortgages.

Some may even charge you if you’re using the credit card for certain types of payments.

For example, payments for insurance premiums may incur a credit card fee. So it’s best to know what’s restricted and what’s not.

Set Up Automatic Payments

We keep repeating it but that is because it is so important, don’t have any late credit bills.

Try to pay off as much of your bill at a time as possible and ensure that there are enough funds to pay it off.

The best way to make sure your bills are paid off is to set up automatic payments ahead of the due date.

Some credit card companies offer an automatic payment plan that transfers over the full amount every month to pay off the balance.

Paying your bills on time also increases your credit score.

Use As Little Of Your Credit Limit As Possible

As tempting as it is, don’t max out on your credit limit. This demonstrates proper credit utilisation and helps your credit score.

Using a small amount of your credit limit also makes sure you won’t roll over any money into the next month.

Rolling money over can damage your credit score and will have interest applied to it.

Some small purchases you can make are paying for petrol and meals out. Of course, this doesn’t mean you have to avoid larger purchases.

By using your credit card to purchase more expensive items you do get short-term insurance on it.

This is because a credit card allows you to report fraudulent payments and hold no liability for them.

Pay Your Bill In Full Each Month

Don’t just pay the minimum amount every month. This is because the balance that gets rolled over to the next month has interest added to it.

You want to avoid any extra fees if you can. By paying the full amount every month you will also quickly build up your credit score.

Check Your Statement Regularly

Check your statement regularly

While it may seem tedious to regularly check your statements, it is the best way to spot any fraud.

A 2018 study found that the US is the most credit fraud-prone country with 38.6% of the reported card fraud losses.

Knowing exactly what payments should be on your statement allows you to see any irregularities, errors, or unauthorised changes.

Getting the app for your credit card statement is the easiest way to check it as you get real-time information.

Most credit card companies won’t hold you responsible for any fraudulent transactions. The faster you spot these transactions, the faster you can alert your credit card company.

Redeem Rewards

As we mentioned earlier, some credit cards offer rewards. Whether it is points, miles, or cashback, it is important to use them.

Most of the credit cards that provide these benefits are more expensive than a standard credit card, so you want to get what you are paying for.

You are getting these rewards by simply spending money, so not using them is a waste.

You must understand how to maximise these rewards. One way to do this is by pairing it with a different reward scheme.

For example, a miles credit card when paired with a frequent flier can offer more benefits combined.

Some of these rewards have expiration dates attached to them, so you need to make sure you use them before you can’t.

Use The Extra Perks

As well as rewards, some credit cards offer extra perks.

You need to know what ones are available to you and they can be found by getting into contact with your credit card company or looking at your card agreement.

Some credit cards offer travel rewards as an extra and it may include baggage fees, car rental, or travel insurance.

Another extra perk is price protection, this allows you to claim money back if the price of an item drops after you have bought it – usually within 30 days.

Other credit cards can offer you an extended warranty on certain items.

Know Your Fees, And How To Avoid Them

When it comes to a credit card, you can avoid almost all the fees associated with it. The only exception is usually the annual fee if your credit card has one.

The best way to avoid these is to pay your bill on time and know of any extra charges.

Common extra charges include any cash advances or foreign purchases. If you avoid these then you will never have to pay extra money to your credit card.

Common Credit Card Jargon Explained

When it comes to finances, there are a lot of words that can be hard to understand.

Here are some of the common words you will encounter when looking into credit cards and what they mean. You will even see some of them being used in this very article!

Balance Transfer

A balance transfer is in reference to moving funds from one card to another. This is usually to pay off funds on one of the cards.

Some credit card companies will charge a fee for this and a percentage of the amount transferred.


Cashback is a benefit that some credit cards offer. It’s when a portion of the money you spent will be paid back either to be used on future purchases or to pay off your balance.

Credit Limit

A credit limit is the absolute maximum amount you can spend on a credit card.

Each credit card will usually have its own set credit limits, but some base it on your affordability, credit history, and credit score.

It is important that you do not go over the limit and instead use a small amount of it so you don’t damage your credit score.

Credit Rating

Credit rating

A credit rating is more commonly known as a credit score. It is what lenders use to assess your eligibility.

Each lender will have its own criteria that you need to meet with some being more lenient than others.

Things that affect your credit rating are if you are on the electoral roll, your previous statements, any loans, credit utilisation, and your previous borrowing history.


This is the amount you have to pay if you miss your minimum payment. Some lenders may also charge an additional fee for this.

A default can show up on your credit report for up to 6 years so you want to avoid one at all costs.

Fee Cap

If your balance isn’t enough to cover your spending then you may face a penalty fee.

A fee cap puts a limit on how many of these missed transactions you will be charged for.

For example, if you are going to face a penalty fee for 5 transactions, you may only get charged for 1.

Introductory Offer

A marketing strategy utilised by credit card companies is to offer introductory benefits.

These could include an interest-free period or low rates for a certain amount of time. This will only be for the beginning of business with them.

Minimum Repayment

This is the minimum amount that must be paid to your credit card to avoid defaults. This figure is usually about 2-5% of the total amount owed or $10-$50.

This figure must always be paid but it’s best to pay more as any balance rolled into the next month will face interest.


You will see this term used online, mainly in emails. This is used when lenders are letting you know that based on the information they have of you that you are eligible for their services.

This doesn’t mean you are guaranteed to be approved by them. This pre-approval is only based on the little information they have.

Purchase Offer

This is another way that credit card companies entice new customers. They will sometimes offer a low or 0% interest rate on purchases for a specific amount of time.


Hopefully, after reading this you feel more confident when it comes to credit cards and how they can be utilised.

It is best to think of them less as a way of borrowing money, and instead as a way of building up a credit score and planning your financial future.

They are merely a tool to be used so that you can make large financial decisions easier later on. Your credit score can greatly impact your life, which is why it is so important to start building it up early.

There is no limit to the number of credit cards you can own. Some people feel happy with only 3, others have over 20. It is completely up to you.

Owning multiple credit cards does show credit utilisation, but you have to be sure that you can efficiently manage all of them.

If you have multiple credit cards, it is a good idea to note down the minimum amount, interest rate, and benefits of each of them.

That way you can use the appropriate credit card when buying something. As long as it is legal you can buy just about anything on a credit card.

Despite this freedom, it is a good idea to only buy what you can afford to pay off. Think of your credit card as a copy of your debit card. Avoid spending money you don’t have unless you plan accordingly for it.

While a credit card is useful, you want to avoid getting into credit card debt. Now that you have all of this information, you can go out there and start applying for credit cards.

Whether this is your first credit card or simply a new one, it is important to treat it as the tool that it is and not leave it to collect dust in your wallet.

Why Trust Us?

At Dollar Bureau, we’re committed to providing you with reliable, unbiased financial guidance. Our content is crafted by everyday Singaporeans who are trained in finance and insurance, ensuring relatable and practical guidance. We uphold strict editorial independence, regularly update our reviews, and value your feedback to keep our information accurate and relevant.

Discover more about our editorial guidelines here.

Jaslyn Ng
Jaslyn Ng
Jaslyn began her finance journey as a ghostwriter for global websites, fostering a unique perspective on the subject. Now at Dollar Bureau's helm, she approaches finance through the everyday Singaporean lens. Her leadership ensures content is both relatable and easy to understand, making complex topics accessible to all.

Disclaimer: Each article written obtained its information from reliable sources and should be purely used for informational purposes only. The information provided by Dollar Bureau and its affiliated parties is not meant to be construed as financial advice. Dollar Bureau shall not be held liable for any inaccuracies, mistakes, omissions, and losses incurred should you act upon any information listed on this website. We recommend readers to seek financial planning advice from qualified financial advisors. 

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