You might know the basics of how credit cards work and even have several in your wallet already. But as you tear open the envelope on a brand-new card and activate it, you encounter a minefield of potential mistakes that could prevent you from getting the most out of it.
Of course, some basics apply to all credit cards. A prime example: Avoid interest by paying your balance in full every month if you can.
But optimizing your new credit card also means avoiding gotchas and not missing out on benefits. Here are common mistakes people make after getting a new credit card.
1. Botching a bonus
If your new rewards card offers a sign-up bonus for new cardholders, it usually comes with strings attached. You might have to spend, say, $1,000 on the card in the first three months or you won’t get that $200 bonus.
To hit such a minimum spending requirement quickly, you’ll want to charge everything you can to the new card, but without going beyond your normal budget to do so.
Some effective strategies:
If you’re out to dinner with friends, volunteer to pick up the check and have them pay you back. That way, you rack up spending for a large purchase.
Temporarily switch monthly expenses, such as subscriptions, to the new card.
Buy retail gift cards for future purchases. (Just make sure you’re playing by the card issuer’s rules.)
Be aware that returns and refunds usually don’t count toward your spending requirement.
Similarly, the clock is ticking on taking advantage of 0%-interest introductory offers. Make note of the deadline.
2. Skipping new-card logistics
Aside from activation, other tasks come along with a new card. For example:
Get online access. Sign up for an online account, and download the app, something fewer than two-thirds of cardholders do, according to the most recent data from the Consumer Financial Protection Bureau. If you already have a card by the same issuer, you can probably add the new card to an existing account or merge accounts under a single login.
Add to a digital wallet. Log the new credit card into your most-used digital wallet, like Apple Pay or Google Pay. That way, you can use the card from your smartphone with wireless checkout readers. One-third of cardholders are using mobile payment services with their credit card, according to a 2021 study by J.D. Power.
Adjust account settings. You not only have a new card but a new account. Customize your settings for autopay, paperless billing, big-purchase alerts, due-date reminders and similar features. Many accounts let you adjust your billing due date.
Enroll in associated programs. Especially for travel credit cards, you might have to sign up for new accounts to get access to airport lounges, travel loyalty programs or a rewards dining program.
One task you can skip? Signing the back of your new card. Feel free, but it’s rarely required anymore.
3. Bungling bonus categories
If your rewards credit card offers extra points or cash back for purchases at supermarkets, for example, you might be bummed to discover your Costco purchases didn’t qualify. It sounds like a catch, but it’s typical with credit card categories because merchants are identified by their merchant category code, or MCC. With many cards, Costco is considered a warehouse club, not a supermarket.
If you have a subscription that falls into a bonus category, like streaming services, make sure to log into those accounts and switch your payment method to the new card.
More generally, develop a system for remembering bonus categories on the new card. That could meaning affixing reminder notes to the physical card or jotting down categories in a file on your smartphone.
4. Passing up perks
It’s worth taking the time to read your benefits guide at least once to get familiar with card perks.
For example, you probably know if an airline-branded credit card offers frequent flyer miles for your spending, but many offer free checked bags, too. At a typical cost of $30 a pop each way for checking a bag, skipping that perk would cost an extra $120 round trip for you and a traveling companion.
Especially on travel credit cards, look for travel credits, airport lounge access and free hotel nights.
Minor perks are worth knowing, too. Your card might offer cell phone insurance, rental car insurance, price protection, extended warranty or free FICO credit scores.
5. Getting ripped off on redemptions
The rewards you earn for credit card spending are only half the value equation.
Especially when earning points instead of cash back, consider what points are worth when you cash them in. For most cards, aim for a penny per point in redemption value. In some cases, point values for merchandise, gift cards and “pay with points” (like at Amazon) aren’t great values, offering less than 1 cent per point.
Nerdy tip: With travel credit cards, consider transferring points or miles to other loyalty programs. It’s how a lot of credit card enthusiasts get outsized value for their points or miles.
6. Dissing discounts
Many large credit card issuers offer card-linked discounts or extra rewards at certain online retailers.
They offer web-based portals and deals that allow you to stack savings or points on top of your card’s normal rewards rate with just a few extra clicks.