You Just Got Your First Credit Card: Now What?

Your first credit card is often the first step to establishing your credit.

For many, it’s a make-or-break milestone. After hearing horror stories about lives ruined from poor credit, having a credit card can be scary.

However, your experience with credit cards is entirely in your control.

By following these tips, you can avoid becoming another horror story and instead set yourself up for success.

1. Activate your credit card and set up the online account

Once you receive your card in the mail, it will come with a set of instructions to set up the account.

A sticker is attached to most cards, with an automated phone number to call to activate it after verifying some information.

The next step is to set up your online account with the card issuer. You can use this account to manage your credit card, view transaction history, make payments, and ensure your credit card is not accessed fraudulently. 

Another benefit of the online account is that you can set payment reminders, so you receive an alert when your due date is approaching to ensure you do not miss it and can avoid harming your credit right out the gate.

2. Pay in full every month

Paying your balance in full every month is a great way to boost your credit score and avoid accumulating debt.

When you are ready to make a payment, you can do so conveniently through your online account. Once logged in, you will have the following options for making a payment:

• Minimum payment: This is an option you should avoid. This option shows you the minimum you can pay to keep your credit card account current, but it is not ideal for positioning yourself early on for stellar credit. Card issuers want to see monthly payments higher than the minimum payment.
• Statement balance: The statement balance is the balance from when your most recent statement closed. Suppose it closes on the 15th of every month. Your statement balance would include all transactions made on your card before the 15th. 
• Current balance: By selecting this option, you would be paying the statement balance along with any other transaction you have made since the last statement period closed. In simple terms, paying with this option would eliminate all debt on the card and bring you back down to a $0 balance.
• Custom amount: This custom option allows you to make a payment of your choosing.

Paying the current balance will help you avoid paying interest on the balance and remain debt-free month after month.

3. Have regular activity on your credit card

Your credit card will not do much for you if it is unused.

By using and paying your credit card every month, you establish a positive payment history and, in turn, raise your credit score.

The only way to accumulate positive payment history is to have a balance on the credit card to pay regularly.

Even if you use it for a small restaurant transaction or a fast-food run, using the card every month will allow you to build a positive payment history.

4. Track your spending

When you are not immediately responsible for paying for items and use a credit card instead, it can be easy to forget just how much you are spending.

Tracking your spending gives you control over your balance and prevents you from incurring debts that you cannot repay.

If you have a credit card, you can access your account online to view your transactions or use a budgeting app, such as Mint. As a result, you can track your spending and ensure you do not exceed your budget.

5. Monitor your credit score

Many credit cards offer free credit monitoring, but what they provide is limited in both access and information.

Instead, you should have a separate credit monitoring service that gives you 24/7 access year-round.

Also, many free monitoring services will show inaccurate scores, which gives you a tainted view of your credit. Instead, choose a service that displays your credit scores and scores in line with those banks use.

In researching these quality services, you may see the cost is upwards of $40/month.

Fortunately, Fund&Grow Credit Services gives you 24/7 access 365 days a year to tri-merge bank-level credit reports for the affordable price of $15.95 a month. This subscription is automatically billed and can be linked to your new credit card to keep monthly balances that you can then pay off to keep your positive payment history on the rise.

Be mindful that it can take up to six months for the credit bureaus to gather enough data to produce a credit score, so it may be some time before you reap the fruits of your positive credit usage.

6. Keep accounts open

The average age of your accounts plays a vital role in determining your credit score.

By closing accounts, you will decrease the average age of your accounts, resulting in a lower credit score.

As you accumulate additional accounts, you may find yourself with some that are unused. Rather than closing them and losing your age, you can store them away securely.

Keep your account active once every few months by using the card and paying off the balance, which will prevent the issuer from closing your account.

If you find yourself not using an account with an annual fee, it doesn’t make sense to keep paying it, so converting it to a non-fee version would be best to maintain the account history.

Your first credit card is a great opportunity to build a strong foundation for the future.

Maintaining your credit in the right way from the beginning can save you from credit card debt and trouble in the future.