When you get your first credit card, it can be thrilling and overwhelming at the same time. It’s exciting because it’s an opportunity to earn rewards, rack up loyalty points, and hopefully enjoy some financial freedom. So they’re here to help answer those questions—and more—as we guide you through getting set up with your first credit card.
Set up your account
When you get your first credit card, you should do a few things right away. First and foremost, make sure that the card is right for you. You don’t want to end up with one that has fees or interest rates that are too high for your budget.
A good rule of thumb is only to use a card if it offers at least 1% cash back on every purchase—that way, any money spent using the card will be immediately returned in rewards (though there are some cards out there that offer even better rewards).
Review your credit card agreement
When you get your first credit card, it’s a good idea to take some time and go through the terms of your agreement. You can find this information in any number of places: on the back of your credit card, in an email welcoming you to your bank account or on its website. Credit builder credit cards are also one option.
Record how much you spend
This step is the most important part of the process, so try to make sure you do it right. It’s easy to lose track of how much money you’re using if you don’t keep tabs on it. You should record each purchase and payment as soon as it happens, whether in a spreadsheet in apps like Mint or Quicken.
This way, you’ll be able to see exactly how much cash is going out per month and your total debt at any given point during the year—and thus know when a big purchase might cause problems down the line.
Pay the full balance when you can
If you’re smart about it, paying off your balance in full at the end of each month will be a breeze. This is because you’ll have the money ready to go and won’t have to pay interest on any purchases. But if you don’t pay off your balance in full every month, things can get tricky—especially if you only make the minimum payment.
Learn about credit reports and scores
When you get your first credit card, it’s a good idea to learn as much as possible about how credit scores and reports affect your finances. This way, if there are any errors on your report or mistakes in the information that’s being used to calculate your score, you’ll be able to take action immediately. You should also pay close attention to how each account affects your overall score since different types of accounts can impact this measure differently.
As per Lantern by SoFi advisors, “You may want to consider taking out additional cards if they offer perks, like airline miles, that you’re sure you will be able to qualify for and use.”
Of course, you can do many other things with your credit card that will help you be smart. You can learn more about how credit scores work and how they affect your ability to get a loan or buy a house in the future. You can also look into how much money you will need to save up before applying for one of these cards to avoid overspending on them.