Getting your first credit card is an important financial step. It can help you start building a credit history, manage everyday expenses, and even earn rewards - but only if used responsibly. Here’s a step-by-step guide to getting and using your very first card the right way.
What Exactly Is a Credit Card?
A credit card allows you to borrow money from the issuing bank to pay for goods and services. You then have to pay back the money, usually within one month. Using one properly allows you to build credit over time.
The Pros:
- Build credit history
- Convenient payments
- Flexibility
The Cons:
- Paying interest
- Potential debt
- Fraud risk
The two main types are secured (requiring a cash deposit) and unsecured cards. Let’s explore which is better for your first credit card.
Do You Really Need a Credit Card?
Building an early credit history opens doors to loans for big purchases later on. Managing expenses with a credit card also lets you track spending and even earn rewards.
If these perks matter for your financial goals right now, then yes - getting a starter credit card is smart for preparing for adulthood.
But if you lack income or struggle with self-control, holding off might be wise. You can always start small later. The choice depends on where you are in life.
Choosing the Best Starter Credit Card
Once you decide it’s time, comparing card offers is crucial - especially for your very first account. Focus on these key factors:
Is It Secured or Unsecured?
Secured cards require cash deposits that become your credit limit. This gives issuers less risk in approving applicants with minimal credit histories.
The downside? Lower limits and deposit obstacles. Still, secured cards allow credit building when unsecured options aren’t yet accessible.
Unsecured cards have pre-set limits without needing deposits, plus better perks and higher maximums over time. But you’ll likely need fair/good credit already for approval.
Understand the Basics
- Credit cards allow you to borrow up to a certain limit and pay over time. Using one responsibly helps build a healthy credit score.
- You will get a statement each month and must make at least the minimum payment. Paying the full balance avoids interest fees.
- Credit utilization—the percentage of your limit you use—greatly impacts your score. Using less than 30% of your limit is ideal.
- Missing payments leads to high interest rates and damage to your score. Set up autopay to avoid issues.
What’s the Credit Limit?
Aim for a starter limit between $300 to $500. This keeps balances at 30% or less of the total limit - ideal for credit scores.
Higher limits tempt overspending, while very low limits ($200 or less) limit rewards potential. Find the “credit sweet spot.”
Choose the Right Starter Card
Look for student cards or secured cards aimed specifically at those new to credit. These have lower barriers to approval but offer less generous rewards and limits compared to premium cards.
Student cards require you to be enrolled in higher education. Secured cards require an upfront security deposit that becomes your limit. This deposit is fully refundable with responsible use.
Best Student Credit Cards: Discover the Best Options for Students in 2023
Opt for cards with no annual fee. Compare interest rates, grace periods, credit reporting practices, and cardholder perks like extended warranties, fraud protection, or basic rewards.
Applications do initiate a hard credit check which can briefly impact your score. Apply only for one card at first to avoid unnecessary checks.
Mind Interest Rates and Fees
Avoid cards with monthly/annual fees when you’re just starting out. Look for intro 0% interest rates on purchases and consider cards with free balance transfer options.
Also, watch out for high ongoing interest rates above 25%. This gets costly if you ever carry a balance.
Check for Starter Rewards
Basic cash back, points, or travel miles are common starter rewards. But some student cards offer bonus categories like groceries or gas. Compare!
Submitting Your First Credit Card Application
Once you compare offers, submit an application for your top choice. Here’s how:
1. Check Your Credit Score
Many issuers share score thresholds for approval odds. Knowing your score helps target the right cards.
2. Pick an Offer and Apply
Submit application forms online for faster processing, though mail works too.
3. Get Approved! (Or Try Again)
Give it ~30 days for review. If denied, wait 6 months before reapplying after addressing score issues.
Using Your Card Responsibly
When that shiny new card finally arrives, exercise smart credit habits right away:
Make On-Time Payments
Set up autopay or calendar reminders for the monthly due date. Late fees hurt!
Keep Utilization Low
Using less than 30% of your limit is best for scores.
Review Statements
Ensure charges match receipts and watch for fraud.
Building credit takes diligence, but it pays off! Now let’s tackle some common questions:
FAQs:
How long does it take to build your credit score with a new card?
In just six months, consistent on-time payments can improve credit scores. But allow 12 to 24 months to pass before you fully benefit from your beginning card history.
What credit score do I need to get approved for most credit cards?
Basic cards are approved for you if your credit is fair (score between 650 and 699). However, you usually need outstanding or exceptional credit (700+) to qualify for premium rewards cards with the best terms.
Should my first credit card have an annual fee?
With starter cards, you can avoid annual fees as they offer no additional benefits. Prioritize building credit in a responsible manner. Later on, advance to more sophisticated cards.
Can I get approved for an unsecured card with no credit history?
Yes, some issuers do approve applicants with no credit history for unsecured cards; however, these cards often have low limits. Prioritize getting your secured card approved.
Should I cancel my first credit card?
Even if you upgrade later, don't close your first card. A longer history of good credit raises your credit scores. It also keeps your total limit higher.
What is the limit of a new credit card?
A new credit card's credit limit is determined by a number of variables, including spending patterns, credit history, and income. It's possible for first-time applicants to have a lesser credit limit.
How much can I use on my first credit card?
The credit limit that has been allocated to you determines how much you can spend on your first credit card. To establish a good credit history, it is advised that you control your spending within this amount.
Why is my first credit card limit so low?
A low credit limit on a first credit card application could mean that the person is building or repairing their credit history. Over time, limit rises may result from responsible usage.
What should I do when I first get my credit card?
Activate your credit card as soon as you receive it and read the terms carefully. To establish healthy credit habits, set up a budget, keep an eye on your expenditures, and make your payments on time.
What is the best age to start a credit card?
It's beneficial to start a credit card at 18 to build credit early and develop good money habits
What is a good APR for a first credit card?
For a first credit card, a suitable APR varies, although lower is usually preferable. To save interest expenses, take into account APRs that are lower than usual.
What is the average APR on a new credit card?
New credit card APRs vary, but according to recent data, they typically range from 24.56% to 27.56%. But credit card interest rates vary a lot; some retail cards have annual percentage rates (APR) as high as 30%.
When is my first credit card payment due?
The due date for your first credit card payment is typically mentioned in the card agreement. It is crucial to pay on time to avoid late fees.
How do I pay my first credit card bill?
You can pay your first credit card bill through various methods, such as online banking, mobile apps, or mailing a check. Choose a convenient option and ensure timely payments.
Why pay credit card 15 days before the due date?
Paying the credit card bill 15 days before the due date ensures that the payment is processed on time, reducing the risk of late fees or negative impacts on your credit score.
What is the 15 3 rule for credit cards?
The 15/3 credit card rule, also known as the "15/3 credit card hack," involves making two payments to your credit card company each month. Here's how it works:
First Payment: Make the first half of your monthly statement balance 15 days before your billing cycle ends. This is often considered the "15" part of the rule.
Second Payment: Pay the remaining balance by the due date, typically at the end of the billing cycle .
While some claim this hack improves credit scores, others argue it's not effective and recommend paying the full statement balance each month to avoid interest charges .
When will I get my first credit card statement?
You can expect to receive your first credit card statement a few weeks after making your first purchase .
The credit card billing cycle typically starts from the 6th of the previous month to the 5th of the current month .
Your credit card billing cycle will begin on the 7th of the previous month and end on the 6th of the current month.
When will my first credit card bill be due?
The due date for your credit card bill is usually 21-25 days after the statement date or after the billing cycle ends.
Let the Credit Building Begin!
Getting your first card is a financial milestone. Apply smart by comparing fees, rates and rewards. Use the new plastic responsibly with on-time payments and low balances. Then watch your credit scores climb month by month!
he key is staying disciplined. Follow these steps to unlock perks like loans and premium cards for life's big purchases. Here's to building your financial future - this journey starts now with card #1!
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