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Credit Card Basics

8 Things You Should Do When You Get a New Credit Card

Your new credit card just arrived in the mail. While you may be tempted to run out and start using it, don't do so right away. After you get a credit card, follow these important steps to get the most from your new card.

Understand the Terms and Fees

Your new credit card comes with a lot of fine print. While you don't need to pore over every word, you should review some key points to make sure you understand the basics of your card's terms and fees.

Start by checking your credit limit. This is the maximum balance you'll be allowed to hold on your credit card. Don't plan to charge up to your credit limit; instead, aim to restrict your balance to about 30% of your limit or less. Your credit utilization—your total balance as it relates to your total credit limit—is a major factor in determining your credit score. If you're using most of your available credit, your score will suffer. Aiming for below 30% utilization is a good rule of thumb, but your score will likely see bigger gains as utilization gets closer to zero.

The most important credit card terms and fees you should know are easy to find: Look for them at the beginning of the documentation that comes with your card in what's called a Schumer box. Here's what you'll find in a Schumer box:

  • Annual fee: Cards that offer cash back, benefits and rewards may charge an annual fee. Make sure you know if your card has a fee, what that fee is and when you'll be charged for it.
  • Purchase APR: The annual percentage rate (APR) is the interest rate the card issuer charges you on any balance that you carry over from month to month.
  • Grace period: Most credit cards offer a grace period between the end of the billing cycle and the date your payment is due. Interest on your balance doesn't accrue until the end of that grace period, so if you pay your balance in full by the due date, you won't pay any interest. The grace period is typically about 21 days.
  • Minimum payment: This is the minimum you must pay by the card's due date each month to keep your account in good standing while carrying a balance. It's almost always a good idea to pay more than your minimum balance. Find out how minimum payments are calculated.
  • Late payment fee: If you don't make at least your minimum payment before your payment due date, most cards charge a late payment fee.
  • Returned payment fee: If your payment is rejected for insufficient funds, the card issuer usually will charge a returned payment fee.
  • Penalty APR: If you fall behind on credit card payments by 60 days or more, the card issuer may charge a penalty APR that applies not only to your outstanding balance, but also to any new purchases going forward. This rate will be higher than the normal purchase APR.
  • Balance transfer fee: If you plan to transfer a balance from a high interest credit card onto a new, lower interest one, be sure you know what the balance transfer fee is. It's typically 3% to 5% of the amount you're transferring.
  • Balance transfer APR: When you transfer a balance to your new card, the amount transferred may be subject to a special APR. Many cards have a promotional 0% balance transfer APR period that may allow you to pay off a transferred balance without incurring additional interest.
  • Cash advance fee: If you use your credit card to get money at an ATM, this is called a cash advance. Not only will this advance show up on your next statement, you'll also be charged a fee (typically 3% to 5% of the total amount).
  • Cash advance APR: Most credit cards charge a higher APR for cash advances than for purchases, and there's no grace period—interest on the balance begins accruing right away. This is a good reason to avoid taking cash advances.
  • Foreign transaction fees: It's convenient to use a credit card when making purchases overseas, but first know whether your card charges a foreign transaction fee (typically 3% of the purchase amount).
  • Additional card/authorized user fee: Some cards charge an annual fee for each authorized user you add to your account.

If your new credit card came with any special promotional rates, check what they are and when they expire. For instance, some cards waive the annual fee the first year or offer 0% APR on balance transfers or new purchases for six, 12 or 18 months. Know when these terms expire so you don't get hit with an unpleasant surprise in your monthly statement.

Activate Your New Card

Before you can use your new credit card, you need to activate it. This is simple to do: Call the phone number on the card or use the link in the acceptance letter. If you're activating your card by phone, be sure to call from the same phone number you listed on your credit card application.

Keep Your New Card in a Safe Place

As soon as your card is activated, put it in a safe place to protect it from theft or loss. You should keep the documentation that came with the card so you can refer to it later on if you have questions about terms, rates or fees.

Learn About the Rewards

Does your new credit card offer a rewards program? If so, explore the details of the rewards so you can take full advantage of them. For example, your card might offer rewards such as cash back or points on certain types of purchases, such as travel, dining out or gas. Sometimes rewards rotate or are offered for a limited time; for instance, you might get triple cash back on travel purchases in the summer or double points on retail purchases during the holiday shopping season. By knowing what rewards are offered when and for what types of transactions, you can use the right credit card for the right purchase.

Find out how to redeem rewards. Some cards apply cash back to your account balance automatically, while others require you to redeem your rewards. Check whether rewards ever expire so you don't lose out on the rewards you've earned.

Sign Up for an Online Banking Account

Getting credit card statements in the mail is so old school. Sign up for an online account to easily manage your new credit card, track your balance, schedule payments and immediately get alerts of any unusual activity on your account. Many banks also offer mobile apps you can use to manage your new credit card account on the go, so it's even easier to stay on top of your spending.

Consider Setting Up Autopay

Payment history is the single most important factor in credit scoring; missing just one payment can have a negative effect on your credit score. To avoid the fallout from late payments, consider setting up autopay for your new credit card. Make sure you always have enough money in the bank account you use for autopay to cover your credit card bill. Using online banking or your credit card issuer's mobile app will help you keep tabs on your balances.

Use Your Card Responsibly

Your new credit card isn't just a convenient way to make purchases—it can also be a valuable tool to help you build a good credit score. Here's what you can do to use your new card responsibly:

  1. Don't charge more than you can pay off. If you carry a balance on your card from month to month, you'll have to pay interest, which can add up quickly. If you regularly have trouble paying your balance in full, you're probably using your credit card to live beyond your means.
  2. Don't charge up to your credit limit on the card. Do you want to use your card for a big purchase, like a vacation that you plan to pay off next month? If that purchase takes you too close to your credit limit, credit scoring companies may calculate your score before your next payment is due. If you must make that purchase, don't wait until the due date to pay it off: Make small payments before the due date to keep your total credit utilization low.
  3. Make your payments on time. Timely payments help build a strong credit score. If you're worried about missing a payment, set up autopay. Get more tips on using a credit card responsibly.

Check Your Credit Score Regularly

If you aren't sure what your credit score is, you can check your credit score through Experian for free. Once you know your credit score, it's a good idea to monitor it on a regular basis. You'll be able to see how your credit card usage may be affecting your credit score and spot any other factors that may be dragging down your score, so you can correct them.

Your new credit card is a powerful tool to help you manage your spending, build a credit history and improve your credit score. Take the right steps from the day you get your card to make sure you get the most out of it.

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