Getting started with your first credit card
Quick insights
- In order to begin using your new credit card, you typically need to activate it, set up online access and understand your credit limit and interest rate.
- Using your credit card regularly while keeping your balance low and paying your bill on time can help set you on your way to a strong credit history.
- Common credit card mistakes include overspending, missing payments and ignoring your credit score.
When it comes to your first credit card, understanding how to use it wisely may be helpful when building a credit history. Let’s dive in below.
Receiving your first credit card
Receiving your first credit card can be a financial milestone. Here are some strategies to help you get started on the right foot:
- Activate your card: Instructions will be provided to activate your card, which can typically be completed online or by phone. This step allows you to start using your card for purchases.
- Set up online access: Creating an online account with your card issuer can help you to monitor your transactions, payments and statements. Online access may help you to manage your card efficiently and stay informed about your spending.
- Understand your credit limit: Familiarizing yourself with your credit limit may help you avoid overspending and incurring penalties. Knowing your limit may also help you manage your spending and maintain a healthy credit utilization ratio.
- Review your interest rate: Your card's interest rate relates to the cost of carrying a balance. This knowledge may help you make informed decisions about paying your bill in full or carrying a balance. As a general rule, paying your balance in full each month is a best practice to avoid paying interest or fees and to keep your credit utilization low.
- Review your statements. You may receive your first credit card statement by mail or online. You may want to consider setting up automatic payments and paying your statement balance in full.
- Read the terms and conditions: The cardmember agreement includes information about fees, rewards and other important details about your new credit card account. Being informed about your card's terms may help you avoid unexpected charges and maximize benefits.
How to build credit responsibly
Building credit responsibly with your first credit card may be supported by consistent and mindful practices. For example, you might consider using your card regularly for small purchases to establish a payment history. Paying your balance in full each month may help you avoid interest charges and demonstrate financial responsibility.
Keeping your credit utilization low is another key factor in building a strong credit score. This practice could help to show lenders that you can manage credit thoughtfully.
Tracking your credit score over time
Monitoring your credit score regularly is also recommended for understanding and improving your financial health. Some credit card issuers offer free credit score tracking, providing an accessible way to keep tabs on your credit status. An example of this is Chase Credit Journey®, a tool that shows you why your credit score changed and by how many points. By regularly checking your score, you can look for any changes or potential issues that may need attention.
In addition to tracking your score, it may be useful to understand the factors that influence it. These factors include your payment history, credit utilization, length of credit history, types of credit and recent credit checks. This knowledge can help you to consider strategic actions, like paying down debt, diversifying your credit mix and improving your credit score.
Common mistakes to avoid with your first credit card
One common mistake first-time cardholders can make is neglecting to review your credit score or monthly statements. Regularly monitoring your credit score and understanding the factors that affect it can help you make informed decisions to improve your financial standing. Regularly reviewing your monthly statements can help promote financial health by identifying any suspicious charges and enabling you to address them quickly.
Another potential pitfall of a first credit card is carrying a balance. Accumulating interest on unpaid balances may lead to significant debt over time. Paying your balance in full each month helps you avoid interest charges, reduces your credit utilization and demonstrates responsible credit management.
Additional tips for using your first credit card
Using your first credit card wisely involves more than just avoiding mistakes. Here are some additional tips that may help you maximize the benefits of your card:
- Setting a budget: Determining a monthly spending limit can support you in staying within your financial means. Sticking to a budget may help you avoid overspending and keep your finances on track.
- Utilizing rewards: If your card offers rewards, you might consider taking advantage of them by using your card for purchases that earn points or cash back. This strategy can enhance the value you receive from your card.
- Staying informed: Keeping up with any changes to your card's terms or interest rates may help you adjust your credit card strategy as needed.
- Building a relationship with your issuer: Establishing a positive relationship with your card issuer may be beneficial if you need to request a credit limit increase or other adjustments in the future. This may be supported by making your payments on time, using your card regularly and keeping your credit utilization low.
The Chase Freedom Rise® card is one option for those embarking on their credit journey. With features like cash back on everyday purchases and a low annual fee, it may help support thoughtful credit building. Using this card responsibly, along with other good financial habits, may help individuals work toward building a positive credit history over time.
The bottom line
Using your first credit card thoughtfully can support your efforts to build a strong financial foundation. Considering good financial habits when you receive your card, using credit thoughtfully and being mindful of common mistakes can support efforts toward building your creditworthiness over time.
