5 things to know before getting your first credit card

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Getting your first credit card can be easy, but understanding the ins and outs of finances is not.
Before getting your first credit card, it’s important to research how interest works, how you can build your credit score, and more.
Online tools and resources, like Discover’s online credit resource center, can help young adults manage their money more effectively and stay savvy.

Getting your first credit card is a rite of passage, but there are many things you need to know before selecting a card, such as which perks it offers, interest rates, credit limits, and how managing your credit will affect your credit score. To get started, visit the Discover credit resource center which answers some of the most popular financial questions and offers tools to help you along the way.

Here are some things you should know before getting your first credit card.

1. Research is the first step.

Before opening a credit card, you need to understand how it works and what happens next. Most people don’t do their homework and end up paying the price later.

"I wish I had done more research about opening a credit card," says Aine Cain, a journalist. "I had zero clue how to handle money, and the whole thing just felt too adult and complicated for me to handle."

Paco DeLeon, a personal finance consultant, stresses the importance of doing your research prior to opening a credit card. "Remember that a credit card is a financial product and by using it, you’re the consumer of that product," she says.

To get started, Discover built an online credit resource center that answers some of the most popular financial questions and offers tools to help you along the way.

2. What affects your credit score.

According to DeLeon, a credit score is a way to put a number to how credit worthy a borrower is. It’s important because it impacts your ability to rent your first apartment, get your first car, or buy your first house.

Even though a credit card — when used responsibly — is a great way to start building your credit score, some people don’t fully understand how it can help. "I didn’t open a credit card for many years because I was always scared I would spend more than I had," says Chelsey Hoffman, a writer.

Andrea Woroch, a personal finance expert, understands this fear and advises against overspending. "Carrying a high balance or regularly maxing out your credit card will negatively impact your credit score, but maintaining a low balance and paying on time will help your score," she says.

Make sure to monitor your credit score often so that you can track your progress. With the Free Credit Scorecard by Discover, you can check without affecting your score.

3. Always try to pay in full.

Using a credit card can at times feel like a ticket to the world — especially when you can swipe at the latest restaurant opening or charge that vacation you’ve been dreaming of. But remember to only spend what you can afford to pay back each month.

Many people see a minimum on their statement and get excited about paying only that amount. But if you don’t pay in full, you’ll accrue interest on your monthly balance and risk having it grow out of control.

"Interest grows exponentially, not arithmetically," DeLeon says. "Making the minimum payment occasionally most likely won’t send you into financial ruin. It’s when you’re consistently not making more than the minimum or paying off the balance that can get you in dire straits."

4. How interest rates work.

An interest rate is a percentage of money charged by a financial institution for lending funds. Cardholders can see this come into effect when they don’t pay their balance in full or regularly miss payment due dates.

"I wish someone told my 18-year-old self that if I don’t pay my bills on time, the credit-card company is going to raise my interest rate," says David Marshall, a creative director.

While it may seem like a surprising charge on your account, there are many things that can increase your interest rate. "One reason for a rate increase could be a low promotional APR, or annual percentage rate, that expires after a certain time," says DeLeon. Yet, if you’re late on your payment, you could be breaking the terms of the promotion and it could increase before the time period ends.

Although the terms may seem dense, it’s important to read all the documents your credit-card company lays out.

5. You can get rewarded.

People work hard for their money and want to be rewarded for it. Credit cards can offer perks and rewards so that you can get more bang for your buck — but when you’re looking for your first credit card, you may not be aware of that. Some great credit-card perks are things like Cashback Match where Discover will match all of the cashback that you’ve earned at the end of your first year. Discover® it cardholders also can get 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, and more, up to the quarterly maximum, each time you activate.

"I wish someone told me to shop around for a card with perks that match my lifestyle so I can reap the benefits more fully," Alli Guerra, a content strategist, says. "I got my first card in college and didn’t do any research — I just went with a basic card available. I definitely wasn’t keeping the perks in mind."

On the surface level, your first credit-card experience can be filled with many knowledge gaps and complicated terminology. But with the right resources, you’ll stay financially equipped, swipe at your favorite places, and consistently improve your credit score.

Click here to learn more about the Free Scorecard by Discover.

This post was created by Insider Studios with Discover.