10 Things to Know Before Getting Your First Credit Card

Getting your first credit card is a significant financial milestone. However, credit cards come with responsibilities and risks if not managed properly. By understanding some critical things about credit cards before applying for your first one, you can avoid pitfalls and use it as a tool to build your credit.

This blog post breaks down 10 essential things you should know before getting your first credit card.

Overview

A credit card can be intimidating and confusing if you don’t understand how it works. Getting your first credit card may seem daunting with high interest rates and various fees. However, when used responsibly, a credit card can help you build your credit score and financial reputation.

It also protects you against fraud better than debit cards or cash. By knowing what to expect and how to manage it wisely, your first credit card can be a valuable stepping stone in your financial journey.

#1. You May Not Qualify for the Best Rewards Cards Initially

When just starting out, you likely won’t get approved for premium travel rewards cards or cards with lucrative sign-up bonuses. These cards often require good credit scores of 690 or higher. Instead, you’ll need to start with a beginner card for those with limited credit history, such as:

Student credit cards
Secured cards (require a refundable deposit)
Cards for fair credit scores between 630-689
Cards you pre-qualify for through credit card companies

The good news is that while starter cards offer less perks, they still help build your credit through responsible use. Within 6-12 months of wise management, you can qualify for better rewards cards.

#2. Secured Cards Are Easier to Qualify For

If you’re having trouble qualifying for an unsecured card, consider a secured credit card. These require an upfront security deposit that becomes your credit limit.

Minimum deposits are often between $200 to $500. The deposit protects the bank since you can lose it if you default on payments.

Responsible use of secured cards builds credit quickly. After around 7 months of consistent payments, you can often upgrade to an unsecured card and get your deposit back.

#2. Credit Cards Can Build Good Credit Faster Than Debit Cards

When used properly by staying under 30% credit utilization and paying your balance off in full every month, credit cards help accelerate your credit score faster than debit cards can. This is because credit cards give a more well-rounded perspective of how you manage debt compared to debit card activity.

Opening your first credit card for this purpose allows lenders to see that you can manage revolving credit responsibly over time through your payment history and amount owed.

#3. Credit Card Fees Can Be Avoided with Responsible Habits

While credit cards can charge high fees like annual, foreign transaction, or over-limit fees, you can avoid them with some simple habits:

Pay your bill on-time and in-full each month
Don’t use your card for cash advances or overseas purchases
Stay well below your credit limit at all times
Only opt-in to needed features like fraud protection

Avoiding late payments also means you can dodge expensive late fees and penalty APR hikes too. Developing these habits early when getting your first credit card will help you maximize benefits and reduce card costs over time.

#4. You Don’t Have to Pay Interest If You Pay in Full Every Month

One way first-timers get tripped up by credit cards is not understanding grace periods. As long as you fully pay your current balance by the due date each month, you won’t accrue any interest charges on purchases during the grace period.

Your grace period essentially gives you an interest-free short-term loan on your monthly obligations when you pay off the full balance rather than carrying any debt over month-to-month.

#5. Paying More than the Monthly Minimum Helps Pay Off Balances Faster

Credit card statements indicate the minimum monthly payment amount due. However, only paying this bare minimum doesn’t make a big dent in your overall debt. It often just covers that month’s accrued interest plus a small amount of your balance.

This can trap you in an endless debt cycle with accumulating interest charges. Pay significantly over your minimum amount due whenever possible to chip away at your balance quicker and save on interest costs over time.

#6. Paying Late Leads to Expensive Penalties

Paying late on your credit card bill triggers expensive late fees, usually over $25 for the first violation and up to $40 thereafter. Severely late payments of 60+ days could also prompt penalty APRs as high as 29.99%. Late payments also negatively impact your credit score.

Stay organized with payment due dates and enroll in autopay from your bank account to avoid late fees causing financial damage.

#7. High Credit Card Utilization Hurts Your Credit Score

Credit utilization measures how much of your available credit limit you currently use with unpaid balances. Maxing your card out to a high limit percentage every billing cycle hurts your credit score by signaling high risk to lenders.

As a general rule, maintain credit utilization below 30% on all cards for the best credit impacts. Keeping credit utilization in check when first getting a credit card will benefit your credit right away and set you up for approval for higher limits down the road.

#8. Your Liability Protection Against Credit Card Fraud Is Better than Debit

Some first-timers fear credit card fraud and shy away from getting one. However, credit cards offer $0 liability policies for fraudulent charges, backed further against loss through major card networks like Visa and Mastercard.

This makes them safer to use than debit cards linked to your bank account when card details get stolen or hacked. Simply report fraudulent activity on your credit card right away to reverse those charges and void that compromised card for a replacement with new card details to prevent future illegitimate purchases.

#9. Credit Card Companies Must Explain Application Denials

Don’t be discouraged if your first credit card application gets denied. Under the Fair Credit Billing Act, when you’re rejected for a new credit card the bank must disclose the main reason why upon your request, usually related to your credit history or income.

Knowing why you were denied helps strengthen future applications by targeting those areas of weakness the card issuer identified. The specific rejection reasons highlight what standards that lender has for qualification acceptance according to your credit profile.

#10. Start Building Credit Wisely Right Away

Getting approved for your first credit card is an important milestone. However, simply having access to revolving credit doesn’t inherently help your credit score or financial trajectory.

You must leverage good credit card habits from the start to build up your profile effectively through your new card. Using credit cards responsibly over time demonstrates to lenders you can properly handle an open line of credit in a trustworthy manner.

Conclusion

Getting your first credit card is an important step. But it’s wise to understand key things about how credit cards work before applying, especially regarding interest rates, payments, fees and your credit implications over the long run.

Equip yourself with credit card fundamentals covered in this article to make the most out of your experience with your starter card as you work your way up to better rewards and benefits down the road through building your credit strategically.

Treat your first credit card properly as a gateway to establish financial responsibility that lenders will reward.

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