Getting your very first credit card is exciting. For many young adults, it’s the best thing to happen since getting your driver’s license and turning 18. But, credit cards aren’t all about having fun. A lot of responsibility comes with having a credit card.
Here’s the short version of what happens when you get your first credit card: the credit card comes in the mail, you activate it, make a purchase, get your credit card statement, and pay the bill. Knowing the details that happen in each step will help you avoid a lot of credit card fees, credit card debt, and credit damage that many young adults experience with their first credit card.
Your Credit Card Comes in the Mail
Soon after you’re approved for your first credit card, your credit card issuer sends a credit card with your name on it to the address on your credit card application.
You’ll have to activate your new credit card before you can use it. On the front of your card, there’ll be a sticker with the phone number to call or the web address to login to activate your credit card. Activation will require you to enter your credit card number and your social security number or your zip code or both. You won’t be able to use your credit card until you activate it.
In the envelope with your credit card, you’ll get a credit card agreement – a long, but detailed document that includes the terms and conditions of your credit card. Your credit card agreement explains features of your account, how and when you’ll be charged for your credit card, what penalties you’ll be charged, and how to handle disputes with your credit card issuer. While it seems like a long, unnecessary document, reading your credit card agreement will help you understand your credit card.
Using Your Credit Card
Your credit card account has been assigned a credit limit – the maximum amount you’re allowed to charge on your credit card. You can make charges up to your credit limit. Unless you opt-in to having over-the-limit charges processed, your credit card will be declined for any purchase that would put you over your credit limit. Even if you’ve opted-in, your credit card issuer will likely only let you charge a certain amount past your credit limit.
Even though you can charge all the way up to your credit limit, that isn’t the most responsible way to use your credit card. For one, your credit card issuer may take back some of your credit limit if you run up your balance too soon. Yes, even though they give you a credit limit, they think it’s risky when you use too much of it. You may be charged a fee or have your interest rate increased if you go over your credit limit.
Using too much of your credit limit also has a negative effect on your credit score – the number that tells whether you have good or bad credit. So, it’s best to charge only a small amount – like 10 to 30% – of your credit limit.
When you make a purchase, the credit card terminal will check with your credit card issuer to make sure your credit card is valid and that you’ll have enough available credit for the purchase. Once your transaction is approved, your receipt will print. You’ll sign the receipt and take your purchase home with you.
Making a Credit Card Payment
A few weeks after you get your credit card, you’ll get a bill in the mail. Your billing statement will detail the charges you’ve made to your account and list the minimum amount that’s due and your payment due date. You have to pay at least the minimum payment by the due date or you’ll be charged a late fee. Miss two payments in a row and your interest rate will increase to the penalty rate. If you never pay your balance at all, your credit card will eventually be charged-off and sent to a collection agency.
Make sure you send your payment far enough in advance the credit card issuer receives it before the due date. The credit card issuer can charge a late fee up to $38 if your payment is received after the due date. Because of mailing and processing delays, this can happen even though you mailed it before the due date. Most credit card issuers let you make payments by phone and online.
Note that you can be charged a fee for an expedited payment made on your due date to avoid a late fee.
Even though you’re allowed to make the minimum payment, it’s best to pay your balance in full at the end of every month. That way you avoid paying interest on the account and you keep yourself from accumulating credit card debt.
Consumer Financial Protection Bureau. "I Went Over My Credit Limit and I Was Charged an Overlimit Fee. What Can I Do?" Accessed Sept. 30, 2019.
myFICO.com. "How Credit Actions Impact FICO® Scores." Accessed Sept. 30, 2019.
Consumer Financial Protection Bureau. "Why Did My Credit Card Issuer Increase My Late Payment Fee?" Accessed Sept. 30, 2019.