Nine Rules Of Thumb For New Credit Card Users

Financial independence can be both a blessing and a burden.

If you just graduated from college and already have a job lined up, you’re no doubt breathing a huge sigh of relief. Too many of your friends are leaving school for an uncertain future filled with job applications, unpaid internships and frequent loans from the Bank of Mom & Dad.

Financial independence is definitely a blessing, but it can also be a burden. We Americans have a tendency to sabotage our financial health by spending more than we earn, and our weapon of choice is the credit card. From year to year nearly 60% of U.S. consumers owe an unpaid debt to their credit card issuers, according to government statistics.

Being a college grad, you’re smart enough to know not to go on a wild spending spree right after depositing your first paycheck. But being a smart card holder entails more than just keeping your spending under control. Here are some rules of thumb:

* Not using credit cards can be almost as bad as overusing them. Some young twenty-somethings are so worried about winding up in debt that they never pull their plastic out of their pockets. Like it or not, a good credit card history will help persuade people you’re a responsible adult. Say you decide to move into your own apartment after spending your first few post-grad years sharing a house with a bunch of roommates. The first thing your prospective landlord will do is check out your credit history. If you don’t have one, he may insist on a second security deposit before letting you move in.

* Make sure your card company has up-to-date information. Changes to your employment status or salary affect how tight a leash your card company keeps you on. If you had a credit card during college and just landed a job, call your card company and tell them about it. Your card probably has a low spending limit, reflecting the fact that you were an unpaid student. Informing your card issuer that you’re now a member of the workforce should result in a limit increase that will allow you to charge like a real adult. (Just don’t become one of those adults who overcharges!)

* Consider making a debit card your go-to card. Because credit cards allow you to spend now and pay later, it’s easy to rack up a huge bill without realizing how deep a hole you’ve dug for yourself. If that’s the sort of temptation you know you’ll find hard to avoid, consider putting the majority of your non-cash transactions on your debit card, which won’t allow you to spend more than you have in your checking account. One caution: If a fraudster gets hold of your credit card, you’ll be liable for no more than $50 in losses; if he drains your checking account via a debit card, you could be out far more if you don’t notice the loss quickly enough.

* Don’t break the 30% rule. Try not to use up more than 30% of the credit available on your card–even if you know you’ll be able to pay it off in full at the end of the month. For a lot of card companies, 30% is the point at which you’re considered a default risk. Once that happens, you’re more likely to get hit with a limit reduction, which can leave you unable to make an emergency transaction, like a plane ticket, when you most need it.

* Spread the pain. If you’re making enough money to engage in heavy charging, consider taking out two or three cards. Racking up high balances on a single one–even if you pay it off every month–can lead to your being pegged a high default risk.

* Beware of “hard checks.” There are two types of credit checks (also known as “pulls” or “inquiries”): hard and soft. The most common example of a soft pull is when you check out your own credit history–it’s something you’re doing for your own information, and nobody’s going to fault you for it. A hard pull occurs when you’re doing something that will change your credit profile–for example, you apply for a new credit card and the card issuer does a check on your credit history before approving you. A hard pull can result in a lowered credit score, so try to avoid them. The bad news is, it’s possible to incur a hard check without realizing it. Sometimes cardholders’ online statements will contain a link at the bottom that lets them request a limit increase–without warning that a hard pull will ensue.

* Pay everything on time–everything. Credit card companies have been known to reduce cardholders’ limits due to late payments on other financial obligations, like car loans. Being current on your credit card while regularly falling behind on other payments will catch up to you eventually.

* Be religious about checking your account activity online. These days most card issuers’ websites allow cardholders to log in and view account activity. Do so frequently, and call customer service if you spot anything out of the ordinary. To protect against identity theft, don’t log onto your card issuer’s website through a wireless network. Web security geeks also recommend you do your sensitive online activity on an Apple ( AAPL – news – people ), since hackers tend to create viruses targeting Windows users.

* Be skeptical of card companies’ marketing gimmicks. Rewards points, free airline miles and the like are used to lure in new cardholders, but for the average Joe the benefits are negligible. When considering whether to sign up for a new card, go online and look for your prospective card’s individual Web page, which most have. Find the link (likely toward the bottom of the page) to the card’s terms and conditions. What you read in the fine print may change your mind about that particular card’s “benefits.” –Asher Hawkins