YesYou may know the basics of how credit cards work and you may already have several in your wallet. But when you rip the envelope off a brand new card and activate it, you encounter a minefield of potential errors that could prevent you from getting the most out of it.
Of course, some basic rules apply to all credit cards. A great example: avoid interest by paying off your balance in full each month if you can.
But optimizing your new credit card also means avoiding pitfalls and not missing out on benefits. Here are the 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 conditions. 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 quickly reach such a minimum spending requirement, you’ll want to charge whatever you can on the new card, but not exceed your normal budget to do so.
Some effective strategies:
- If you’re going out to dinner with friends, volunteer to pick up the check and ask them to pay you back. In this way, you accumulate expenses for a major purchase.
- Temporarily switch monthly expenses, such as subscriptions, to the new card.
- Purchase retail gift cards for future purchases. (Just make sure you’re playing by the card issuer rules.)
Be aware that returns and refunds generally do not count towards your spending needs.
Likewise, time is running out to take advantage of the 0% interest introductory offers. Take note of the deadline.
2. Skip the logistics of new cards
Apart Activation, other tasks accompany a new card. For instance:
- Get online access. Open an account online and download the app, which less than two-thirds of cardholders do, according to the latest data from the Consumer Financial Protection Bureau. If you already have a card from the same issuer, you can probably add the new card to an existing account or merge accounts under one login.
- Add to a digital wallet. Connect the new credit card to your most-used digital wallet, like Apple Pay or Google Pay. This way you can use the card from your smartphone with wireless cash readers. A third of cardholders use mobile payment services with their credit card, according to a 2021 study by JD Power.
- Adjust account settings. You not only have a new card, but a new account. Customize your settings for autopay, paperless billing, large purchase alerts, due date reminders, and similar features. Many accounts allow you to adjust your billing due date.
- Sign up for related programs. Especially for travel credit cards, you may need to open new accounts to gain access to airport lounges, travel loyalty programs, or a restaurant rewards program.
A task you can ignore? Sign the back of your new card. Feel free, but it’s rarely necessary anymore.
3. Awkward bonus categories
If your rewards credit card offers extra points or cash back for grocery store purchases, for example, you might be disappointed to find that your Costco purchases don’t qualify. It sounds like a trap, but it’s typical of credit card categories, as 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, be sure to log into those accounts and change your payment method to the new card.
More generally, develop a system for memorizing bonus categories on the new map. This may mean affixing reminder notes to the physical card or jotting down categories in a file on your smartphone.
4. Skip Perks
It’s worth taking the time to read your benefits guide at least once to familiarize yourself with the card’s benefits.
For example, you probably know if an airline-branded credit card offers frequent flyer miles for spending, but many also offer free checked bags. At a typical cost of $30 each way to check in a bag, skipping this benefit would cost an additional $120 round trip for you and a travel companion.
Especially on travel credit cards, look for travel credits, airport lounge access, and free hotel nights.
The minor benefits are also worth knowing. Your card may offer cell phone insurance, car rental insurance, price protection, extended warranty, or free FICO credit scores.
5. Getting scammed on redemptions
The rewards you earn for credit card spending are only half of the value equation.
Especially when you’re earning points instead of cash back, consider what the points are worth when you cash them in. For most cards, aim for a penny per point in cash 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. This is how many credit card enthusiasts get outsized value for their points or miles.
Many major credit card issuers offer linked cards additional discounts or rewards at some online retailers.
They offer online portals and offers that allow you to accumulate savings or points on top of your card’s normal rewards rate with just a few extra clicks.
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