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You've received your first credit card. Now what?

Congratulations on receiving your first credit card! Credit cards are great for building credit, earning rewards, and managing your finances. However, credit cards are just like any other tool, and it’s best to read the fine print before using them. Just like buying a saw and hammer doesn’t guarantee you can make a table, it takes more than simply owning a credit card to master the basics of credit. But, with a little education and planning, you can.

Translating credit card terms

Understandably, decoding the terms and conditions that come with your credit card can be seem like a complicated task. Here’s a quick translation of the credit card terms you’ll regularly encounter, so you can have confidence that you know what comes with your card.

  • Annual fee: The yearly fee you are charged for holding a card. Cards with annual fees can be beneficial, since they typically offer higher rewards and benefits. However, cards without an annual fee, such as our SCU Collabria Cash Back Mastercard®, make sense if you don’t intend to use the card often, or if you’re just building credit.


  • Annual percentage rate (APR): The interest rate you’ll be charged if you don’t pay off your entire credit card balance by the end of each billing cycle. Most cards charge high interest rates (around 19.99%), so if you intend to hold a balance on your card, you may want to look for a card option with a lower interest rate (like our SCU Collabria Classic Mastercard®, which offers 12.99%). Or, talk to us about a line of credit, which offers a much lower interest rate.


  • Cash advance: Money withdrawn from your credit card account. Cash advances can be costly, as credit card providers will usually charge higher interest rates and fees on the withdrawal, and interest is charged daily from the time you withdraw the cash until you pay off your balance. If you do need to make a cash advance for an emergency, make sure you can pay it back quickly.


  • Credit limit: The maximum amount you can borrow with your card. Although your credit card provider may offer to increase your credit card limit, you can also choose to keep a lower limit to help minimize spending.


  • Grace period: A period of time during which, if you pay your full balance by the due date, you won’t be charged interest on credit card purchases. This grace period will apply to new purchases, even if you carry a balance from the past month.


  • Minimum payment: The lowest amount you must pay every month to avoid penalties. It’s essential to make the minimum payment, but it mainly covers your insurance cost, so try to pay above that on your balance. Use our Cost of debt calculator to determine just how expensive interest-only payments can be.


Gathering the facts

Once you’ve activated your card, you can start using it to make purchases — but before you do, there’s a few details that you’ll want to know.

  1. Your billing cycle: This is the amount of time between credit card statements. Your billing cycle affects your grace period and when you need to make payments. You can find this by checking your monthly billing statement, or viewing your credit card account online.

  2. Your payment plan: Determine when your minimum monthly payment is due in order to avoid late fees and keep a good credit score. If you miss two payments in a row, your card issuer may also apply a penalty rate to your balance. It’s best practice to make your payments a few days in advance to ensure your credit card provider receives the payment before the due date. Or, you can set up automatic recurring payments to your credit card account.

  3. Your budgeting plan: Budgeting is an important part of managing your credit card. Before you use your card, plan when and how you intend to review your budget so you can stay on top of your spending. It’s also a good idea to take this time to go through your credit card statement to make sure there aren’t any unauthorized purchases. If an item you didn’t authorize appears on your bill, notify your issuer, and they may reverse it.


Unpacking the “credit” in credit card

Having “good” credit — which is determined by what’s known as your “credit score” — means your lender has confidence in you. The higher your score, the more responsible you’ve shown yourself to be with credit. That trust becomes important when you are applying to finance major purchases, such as a mortgage for your home. It also determines how much you’ll have to pay in interest when you borrow. Credit cards are a great way to raise your score, provided you are:

  1. Ensuring your balance isn’t maxed out: Keeping your balance to 60% of the approved limit on a regular basis will keep your credit score high. For example, if your credit limit is $1,000, your outstanding balance at the end of the month should not be more than $600. Your credit card issuer may also reduce your credit limit if you run up your balance too fast.

  2. Limiting the number of credit cards and credit applications: Only apply for the credit you truly need (stick to one or two credit cards). The more applications and cards you have, the more chances of having a negative impact on your credit score. In fact, the number of credit checks lenders make when you apply for a lending product accounts for roughly 10% of your credit score and remains on your credit report for two years.1

  3. Paying off your credit card at the right time: Although you want to make sure you’re making your credit card payments on time, paying off your balance too often makes it seem like you’re not using credit at all. Wait until closer to your due date to make your payment, and find a schedule that works for you and your budget.

Have more borrowing questions, or want to explore other options? We can help. Simply fill out our contact form, and we'll be in touch.

®The Collabria Mastercard is issued by Collabria Financial Services Inc. pursuant to a license from Mastercard International Incorporated. Mastercard is a registered trademark and the circles design is a trademark of Mastercard International Incorporated.
Equifax, "How Credit History Impacts Credit Scores," 2018.

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