12 credit card beginner tips you may have not considered
Quick insights
- Starting with one credit card can help keep your finances manageable and simple.
- Hard credit checks from credit card applications can temporarily lower your credit score, so apply for new credit sparingly.
- Choosing a credit card with no annual fee can be beneficial for beginners to help minimize costs.
Navigating the world of credit cards can be daunting, especially for beginners. But with the right knowledge and strategies, you can use credit cards to your advantage. Here are 12 tips to help you get started.
1. Starting with one credit card
Starting with one credit card can be a wise decision, especially if you're new to credit. It may be more manageable to focus on one card so you can take the time to learn the ropes without getting overwhelmed. Using one credit card responsibly, such as by paying your bills on time, can help you build a good credit history.
As you become more comfortable with using credit, you may consider adding more cards to your wallet. Remember, each new card means another account to manage, another balance to pay and potentially more debt to carry. It can also impact your credit score in other ways, which we’ll explore below.
2. Be aware of hard credit checks
Each new credit card application comes with pros and cons and requires a hard credit inquiry. Let’s take a look at what that entails:
- Hard credit checks: Each credit card application results in a hard credit check on your credit report, which can temporarily lower your credit score.
- New accounts: Applying for multiple new accounts in a short time period can also lower your credit score, as it can make you seem riskier to lenders.
- Credit utilization: Increasing your credit limit can lower your credit utilization ratio (the amount of credit you're using compared to your total available credit), which can help improve your credit score. It is generally recommended to keep your credit utilization ratio at or below 30%.
- Strategic applications: Apply for new credit sparingly and strategically to minimize the negative impacts and maximize the positive impacts on your credit score.
3. Choose a card with no annual fee
Choosing a credit card with no annual fee can be a smart move for beginners. It's one less cost to worry about, and it can help make it easier to manage your card even if you don't use it often.
That said, you may not want to rule out cards with annual fees entirely. Some of these cards offer benefits that can outweigh the cost of the fee, such as higher rewards rates, cash back, travel rewards or other perks. It's all about finding the card that offers the best value for you.
4. Understand balance transfers
Balance transfers can be a useful tool for managing credit card debt. Essentially, a balance transfer allows you to move debt from one credit card to another, typically to take advantage of a lower interest rate. Here are a few things to keep in mind:
- Consolidating debt: If you have high-interest debt on multiple cards, a balance transfer can help you consolidate that debt onto a single card with a lower interest rate. This can simplify your payments and potentially save you money on interest.
- Transfer fees: While a lower interest rate can save you money, keep in mind that many cards charge a fee for balance transfers, typically a percentage of the amount transferred. Be sure to factor this fee into your calculations when deciding whether a balance transfer makes sense for you.
5. Understand foreign transaction fees
When you're traveling abroad or shopping online with foreign vendors, foreign transaction fees can add to your costs. These fees are charged by some credit card companies for transactions made in a foreign currency.
Some cards, however, don't charge these fees. If you travel frequently or shop internationally, it might be worth looking for a card that doesn't charge foreign transaction fees. Be sure to check the terms of your card before you travel or make a purchase from a foreign vendor.
6. Look for introductory offers on credit cards
Introductory offers on credit cards, such as low or zero interest rates, can be appealing; however, you may want to understand the terms of these offers before applying. Here's what to consider:
- Limited time offers: Low or zero interest rates are usually for a limited time. Keep track of this introductory period so you’re prepared for when it ends.
- After the intro period: After the introductory period ends, the interest rate will typically go up, often significantly. Be sure you know what this rate will be and that you can afford it.
7. Set payment alerts
Setting up payment alerts can be a helpful way to avoid missing a credit card payment. Most credit card companies allow you to set up these alerts through their online banking platform or mobile app.
You can usually choose to receive alerts by email, text message or both. Setting up payment alerts can help you avoid late payment fees, protect your credit score and help stay on top of your credit card balance.
8. Understand unusual activity protection policies
Credit card companies have policies in place to protect you from unauthorized purchases. Here's what you need to know:
- Protection policies: These policies can include zero liability for unauthorized purchases, which means you won't be responsible for any charges you didn't authorize.
- Reporting unusual activity: If you notice unusual activity on your account, report it to your credit card company as soon as possible. The sooner you report it, the sooner they can stop any further unauthorized charges and start the process of investigating the ones that may have already occurred.
9. Dispute incorrect charges
If you notice an incorrect charge on your credit card statement, it's important to act quickly. Contact your credit card company as soon as possible to dispute the charge. Keep in mind that there may be a time limit for disputing charges, so don't delay.
It may also be a good idea to keep records of your communications with the credit card company, including dates and times of calls, names of representatives you spoke with and any letters or emails you send or receive.
10. Educate yourself with resources and tools
Some credit cards offer educational resources and tools to help you understand credit and manage your finances better:
- Learn about credit: Absorb articles, videos and interactive tools that explain how credit works, how to build and maintain good credit and how to use credit cards wisely. The Chase Mobile® app includes features like spending and budgeting tools to help you stay on top of your purchases, while free tools like Chase Credit Journey® can help you monitor your credit score without needing to become a Chase customer.
- Make informed decisions: By using these resources, you can make more informed decisions about your credit card use, which can help you avoid common pitfalls and build a strong financial future.
11. Paying on time and, when possible, in full
Paying your credit card balance in full each month is an important healthy habit you can develop. If you pay your balance in full each month, you won't be charged interest on your purchases. This could potentially lead to significant long-term savings over time compared to cardmembers who carry a balance and pay interest. Paying in full can help you avoid the trap of minimum payments, which can lead to long-term debt.
Regular, on-time payments can help you build a strong credit history, which can help you maintain or improve your credit score. Setting up recurring payments can help you pay your bills on time, and if you choose to auto pay your full balance you can also help prevent those interest charges.
12. Understanding your credit limit
Knowing your credit limit and how to manage it is important, especially for first-time cardholders. Here's what you need to know:
- Credit limit basics: Your credit limit is the maximum amount you can charge on your credit card. It's determined by your lender based on factors like your credit score and income.
- Staying under the limit: Try to keep your balance well below your credit limit. High utilization can negatively impact your credit score.
The bottom line
Using credit cards wisely means accumulating healthy habits and keeping in mind several helpful tips, such as understanding the impact of hard credit checks and knowing your card's unauthorized purchase policies. Starting with one credit card can help keep things simple and manageable as you learn to navigate the world of credit.
