Getting your first credit card can be a stressful experience but it is an important step on your credit journey.
Your first credit card is an important rite of passage in your financial life. It will impact your credit for the rest of your life, and you should make sure that you are entirely prepared to make a decision on your first credit card when the time comes. Unfortunately, a lot of credit cards that are marketed to beginners are not going to be the best of the best. This is because a lot of the perks and rewards that come with credit cards come when you have a positive credit history.
Building a positive credit history and simply establishing your credit history is a big part of what getting your first credit card is all about. You will need to look at your options, decide on a card that fits your needs, and then go through the application process. Another unfortunate reality of getting your first credit card is that there may not be a lot of options out there for you in the beginning. However, don’t let that fact discourage you. There are still some great beginner options out there.
Before doing anything, you should make sure that you meet the minimum requirements for a credit card. You must be at least 18 years old, though it is easier to get a credit card after the age of 21. You also must have an income, and most credit issuers will prefer that this income comes from a steady job; however, some other forms of income like child support, Social Security, or Disability income may be accepted.
Once you’ve figured out how credit cards work, it’s time to dive into the process of getting your first credit card. Let’s explore the ins and outs of starting your credit journey.
Credit Cards For Beginners
There are a few different types of credit cards that are catered specifically to those who are just getting started on their credit journey. These are often called starter credit cards and have a few features that set them apart from other credit cards. These features don’t typically make them more attractive options; instead, they’re designed to mitigate risk to the banks that issue them. Starter credit cards usually have lower credit limits, have higher interest rates, and offer limited rewards, if any.
Another type of credit card that is designed for beginners is a student credit card. If you’re in college, there’s a good chance you will have no problem getting approved for this type of card. Student credit cards are easier to get than other types of beginner credit cards and may offer more attractive terms. The only catch is that you must be enrolled at least part-time in a qualifying college or university program to be eligible to apply.
Finally, perhaps the least attractive option, are secured credit cards. This type of card is going to require you to make an initial deposit in order to receive and use your card. Deposits typically start at around $200 and whatever you deposit usually determines your credit limit. While these do have an upfront cost associated with them, they do come with the best approval odds for someone with little to no credit history.
Regardless of which option looks most attractive to you, you’re going to want to compare each card carefully to see what’s going to fit your needs.
Picking Your First Credit Card
Once you understand what type of card you’re going to apply for, it helps to compare your options in that category as well. You should look at a few key things when you’re making your selection. The two most important things to consider are fees and the APR.
First off, consider fees. The biggest fee to look out for is the annual fee. Many credit cards, especially those for beginners, don’t have an annual fee at all. However, there are plenty of cards out there that still carry them, and they are generally around $50 per year. Some of them can be as high as $95 per year. For your first credit card, you should try to find one that carries no annual fee at all. You should also look out for late fees and any other fees listed by the card issuer.
APR stands for Annual Percentage Rate, and it refers to the interest you’ll be required to pay on your purchases. Among beginner cards, the average rates range from as low as 15% up to 23%, but some can be higher. In an ideal world, you will be able to pay off your statement balance in full every month, which would allow you to avoid paying any interest; however, that may not always be possible. Interest can sneak up on you quickly, so trying to get the lowest possible APR is something you should always focus on when picking your first card.
By the way, the APR that your credit card advertises is only for purchases. Cash advances and balance transfers come with a different APR. There is also something called a penalty APR to look out for. If you fail to make at least the minimum payments on your statement balance each month, that’s when the penalty APR kicks in, which can be substantially higher.
One major caveat when you consider APR is if you plan to carry a balance over from month to month. If you think you might need to carry over a balance regularly, the APR is probably more important than the fees. But we strongly recommend that you don’t carry a balance if you can avoid it. Paying off the balance in full every month prevents the huge interest charges that are typical for credit cards. If you won’t carry a balance over each month, the APR shouldn’t matter very much.
Before you apply for a credit card, it is best to read through the entire terms and conditions or the cardholder agreement. This is especially true for your first credit card so that you have an understanding of how interest works, how the card works, and more. Also, be sure to determine when your statements will be sent, the grace period between the end of your billing cycle and payment date, and how your payments should be made (such as online or by mail).
One mistake a lot of young people make when it’s time for their first credit card is getting a store card from somewhere like Macy’s, Walmart, or Ulta. Store credit cards can be great because they allow you to make large purchases over time and can provide you with awesome deals at the store. However, they can come with higher interest rates and can often only be used for that specific store, which means they’re probably not a great choice for your first credit card.
Understanding The Application Process
You’ve compared your options, read through the terms and conditions, and now you’re ready to apply for your first credit card. Awesome! It’s important to make sure that you’re being realistic with your expectations before you apply for your first credit card; this will help you make the most informed decision. You’re probably not going to be eligible for a very high credit limit or a great APR right out of the gate, and that’s okay. Building credit is a process and takes time.
If you feel like you’re properly informed and are applying for the best card for you, the application process can begin. Some websites offer you the option to go through a preliminary application process in which you’ll answer a few questions about yourself and then the tool will present you a list of potential cards based on your approval odds. You may want to try out a tool like this; it’s usually called prequalification and it helps you avoid multiple hard pulls on your credit from cards that you do not have good approval odds for. Even if you use a tool like this, you will still need to complete a formal application.
A credit card application is going to ask you a lot of personal information, including your name, phone number, address, and social security number. You will also be expected to provide details about your income, average expenses, and your employer. Banks use your income information to verify that you’ll be able to pay them back and to determine your credit limit when you open a card. You will also need to already have a checking or savings account, and you may be required to provide the routing and account numbers in your application as a method for paying your bill each month.
Make sure that you complete your application on your own device and that it is done over a secure connection to protect your information. Never fill out a credit card application on a website that you don’t feel comfortable using. You should also never lie on a credit card application, as there can be serious legal repercussions if found out.
Once you submit your application, it’ll be sent out to the lender. The lender will pull your credit report, which is called a hard pull or hard inquiry. Every hard inquiry does impact your credit score a little bit, which is why it is so important to make sure you’re applying for a card for which you meet the minimum requirements. It’s no big deal if you end up getting denied. However, you should be careful about filling out a ton of applications, because your credit score can take a significant hit. Your lender will look at your application, credit report, and income information that you provided to see if you meet their standards.
Most online credit card applications provide instant results. If you’re approved, they will send out your card through the mail. If you’re approved for a secured credit card, you will be required to make a deposit equal to the credit limit they set for you before you can receive your card and start using it. If you’re denied for a credit card, they will tell you right away and mail you a letter explaining why you were denied within a week or two.
Should You Even Get A Credit Card?
The answer to this question is almost always yes. Having good credit starts with establishing a positive credit history. Credit cards are the quickest way to establish credit and they give you the opportunity to create a positive payment history, which is the number one thing that is used to calculate your credit score. Things like credit card utilization and length of credit history are also factors that will impact your score.
Starting your credit history early and making sure you make timely payments are key in elevating your score and keeping it where you want it to be. It’s also one of the only ways that you can build credit without paying interest (so long as you follow our advice and pay your bill in full each month).
Having a good credit score is something you will probably take for granted; however, if you have no credit history or end up with a bad credit score, you will absolutely regret it later on. Good credit allows you to qualify for lower interest when financing a car, makes it easier to secure a mortgage, and can come in handy if there’s ever an emergency or if you have a specific goal that will require you to take out a loan.
Having a credit card can be kind of scary, because no one wants to incur debt they can’t pay back. Make sure you’re using your credit card wisely by making only necessary purchases, making payments on time, paying your full statement balance, and avoiding maxing out your card as much as possible. Make sure you keep an eye on your credit reports and credit score. Also, avoid hard inquiries by making smart application decisions. Approvals help boost your score, but denials always drag it down.
The bottom line is that having a credit card is a positive thing and can be a really helpful tool to keep in your wallet. Just make sure that you consider all your options, understand the terms of your card, apply smartly and sparingly, and use your card wisely once you have it.