6 things to know before getting your first credit card

The thought of getting a credit card is exciting. Credit cards offer potential and opportunities—the chance to build credit with responsible use and work toward big financial goals. And depending on the card, the chance to get rewarded while you do it.

But before you apply for your first card, it’s important to learn how credit cards work so you can feel confident about managing your account responsibly.

What you’ll learn:

• Responsible credit card use can help you build a strong credit history. 

• Understanding your credit card’s terms and conditions can help you avoid unexpected and unnecessary fees and penalties.

• Checking your credit reports and scores can give you an idea about what type of card might be a good fit.

• Seeing if you’re pre-approved can help you avoid unnecessary hard inquiries, which can cause your credit score to drop temporarily.

When you have a credit card, your issuer will report payment and balance information to credit bureaus. That information appears in credit reports and is used to calculate credit scores. 

That’s how using a credit card responsibly can help you build credit over time. Here are a few ways the Consumer Financial Protection Bureau (CFPB) says you can get—and keep—good credit scores:

• Make consistent on-time payments. That means paying at least the minimum every month. But paying off your statement balance in full can help you avoid interest charges.

• Keep your credit utilization low. In other words, avoid maxing out your card.

• Only apply for the credit you need. Applications can cause hard inquiries, which can hurt your credit scores and look bad to lenders.

Before applying for a credit card, it helps to study up on the lingo. Here are some common credit card terms you may run into and what they mean: 

• Annual fee: Some issuers charge a yearly fee to keep accounts open.

• Annual percentage rate (APR): As the CFPB explains, “A credit card’s interest rate is the price you pay for borrowing money.” Credit card interest is typically shown as a yearly rate known as an APR. Cards typically have different APRs for different transactions, such as purchases and cash advances.

• Credit limit: This number is the maximum amount you can charge to the credit card. If you hit the credit limit and want to spend more, you may need to pay down some of the balance first. 

• Minimum payment: This is the minimum amount you must pay each billing cycle to keep your account up to date and avoid penalties and fees. If you pay just the minimum and let the rest of your balance roll over, you’ll likely be charged interest. 

• Payment date: This is when a payment must be received by your credit card issuer to avoid being past due. If your payment is late by even a day, the issuer may charge a late fee. Late and missed payments can hurt credit scores and result in late fees.

Your credit scores play a role in whether lenders will approve you for a credit card. Scores can also be used to set interest rates and other terms. 

Before applying, it’s a good idea to check your credit scores and reports. It can help you know where you stand. And if you spot errors, you can dispute them.

Not sure where to start? You can use CreditWise from Capital One to monitor your VantageScore® 3.0 credit score and TransUnion® credit reports for free. You can also get free reports from each of the three major credit bureaus from AnnualCreditReport.com.

If you’re establishing credit, it can be harder to qualify for a credit card. One reason is because you don’t have a long credit history to help issuers as they review your application. 

But there are options for people who are new to credit. One type is called a secured credit card.

A secured card can be used to shop in stores and online. But unlike unsecured cards, secured cards require a refundable security deposit to open an account.

That security deposit is held as collateral, similar to the security deposit you give a landlord when you rent an apartment. If you fall behind on payments, the issuer may take the deposit. But using your secured card responsibly can help you establish good credit. And it could put you in position to graduate to an unsecured card in the future.

Before you apply for a credit card, it’s worth checking whether you’re pre-approved or prequalified. 

Credit card pre-approvals typically don’t require hard inquiries. And it can give you a better idea of which credit cards you might be eligible for. If you’re pre-approved for multiple cards, you can determine which card best aligns with your financial needs before applying.

Payment history is the biggest factor determining your credit scores. So it’s worth repeating how important it is to pay your statement on time every month. 

Late credit card payments can hurt your credit and lead to fees and other penalties. Set a goal to pay your credit card bill on time every month, and use monthly reminders or automatic payments if you need help remembering.

You can use a credit card responsibly to build strong credit. But it takes time and responsible use. That means understanding how your credit card works and developing good habits, like paying your bills on time and keeping your credit utilization low.

Ready to get started? You can compare Capital One credit cards designed for people trying to build credit and see if you’re pre-approved.