Home > 2015 > Credit Cards

The First Thing to Do When You Get a New Credit Card

Advertiser Disclosure Comments 1 Comment

When many people receive a new credit card in the mail, they just want to activate it and go out to spend with it. But not so fast.

The first thing that you should do when you receive a new credit card is to familiarize yourself with its interest rates, fees, rewards and benefits. When you get a new credit card, you’re supplied with a lot of materials like your cardholder agreement. Your first task is to read through the terms of your card and here’s what you should look for.

Start With the Interest Rates

Nearly every credit card disaster story includes a part the where someone realizes that they had no idea about a certain aspect of their card. But by examining the details of your card before you use it, you can ensure that it won’t happen to you.

First look at the standard interest rate, which is expressed in terms of APR, or annual percentage rate. This is the rate that you will typically pay if you carry a balance on your card. And when this rate is divided by 365, it gets applied to your balance each day. Nevertheless, your credit card’s terms and conditions will spell out how to avoid incurring interest on your charges by paying your statement balance in full and on time. In some cases, new account holders are eligible to receive 0% APR promotional financing for a limited time, and, if applicable, these terms will be indicated as part of the standard APR.

Another interest rate that may apply is the card’s balance transfer APR. This is the rate that interest will be applied to any balance you transfer that you make from another credit card. And if any promotional financing offers apply to balance transfers, this is where it will be listed. Other interest rates that may apply can include the cash advance APR, the overdraft APR and the penalty APR. With the penalty APR, the terms and conditions will specify not just the rate, but the circumstances when this rate will apply, such as after a late payment is made.

Your standard interest rate will vary depending on your credit score, so don’t be surprised if the interest rate on your card isn’t the lowest one advertised by the issuer if you have less-than-excellent credit. (You can check your credit scores for free on Credit.com to see where you stand.)

Understand Your Fees

After interest rates, the next most important terms to be aware of are the card’s fees. Cardholders should know what annual fee they can expect, as well as any other fees for specific services. For example, most credit cards will charge a balance-transfer fee of a percentage of the amount transferred, typically 3%.

If you would ever consider using your credit card at an ATM, you should be aware of cash advance fees that can be as high as 5%.

Those who travel outside the U.S. should learn if their card has a foreign transaction fee. Many cards charge 3% on all charges processed outside of the United States, but thankfully, some card issuers have eliminated this charge. And finally, cardholders should learn what their card’s late payment fee is — which should give them a good reason to avoid it.

Finish by Learning About Rewards & Benefits

With the potentially costly topics of interest rates and fees behind you, it is now time to consider a more pleasant subjects like rewards and benefits. If you are using a rewards credit card you will want to know how many points, miles or dollars back you will receive for various types of purchases, and if there are any annual limits to the amount of rewards you can earn. You should also learn about the terms of any sign-up bonus promised, such as minimum spending requirements within a limited period of time. In addition, you should also start learning about the best ways to redeem your rewards, although that can wait until you have begun earning some.

Finally, most credit cards now come with a wide range of travel insurance and purchase protection benefits, including rental car insurance, extended warranty coverage and purchase protection policies. Cardholders should spend a few minutes reading about these in an included “guide to benefits” pamphlet. For example, anyone relying on their rental car insurance should understand when the coverage applies, and what is excluded. The same applies to purchase protection coverages such as extended warranty coverage and price guarantee policies, as each of these benefits has a long list of excluded items.

By familiarizing yourself with all aspects of your credit card before you begin using it, you can be sure to gain the most from it, while spending the least to enjoy the benefits.

More on Credit Cards:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Jack Soffalot

    Sign The Back

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team