Deciding which credit card to get when you’ve never had one before can certainly be overwhelming. Before you start submitting all those applications, though, make sure you take some time to learn how credit works, what your credit card options are, and how to go about actually getting a credit card.
What’s the Best First Credit Card?
There is not one single credit card that is the best for all first-time cardholders, because every card applicant has a different financial background. To determine what kinds of credit cards you should be looking at, you’ll need to check your credit score first. Those with good credit will have more options than those with bad credit or no credit at all. Once you have that information, you can make a wise decision about what credit card you should apply for.
How Do I Get a Credit Card?
You usually need to show three things in order to get a credit card: a Social Security number (or taxpayer identification number), your ability to actually pay the credit card bill, and a fair credit score at a minimum. Start your search at your bank or credit union since they already know you. If you have been a good customer, the bank will probably be happy to offer you a credit card as well.
Maybe you’ve already been found by some credit card companies; you can compare the deals that these companies sent you in the mail. They will inform you of the rewards, the introductory rate, and anything else they can think of that will encourage you to choose their card. The back of the offer will give you the important details, including fees, finance charges, and interest rates.
You can also look online for more credit card offers. Make sure you read the card’s important terms and conditions before you apply. All that fine print matters.
How Do I Get a Credit Card With No Credit?
If your credit isn’t good enough to get a card on your own, you can possibly get a card by having someone cosign your credit card application; this means they’re responsible for the payments if you fail to make them. (If you’re younger than 21, you’ll most likely need a cosigner unless you have proof that you have an independent source of income.) When someone cosigns a credit account, they put both their finances and credit at risk, so you should make sure that you and your potential cosigner both consider the consequences as well as how the arrangement will be managed before you commit to anything.
If you don’t want or don’t have the option of a cosigner but have bad credit or even no credit, you can apply for a secured credit card.
What Is a Secured Credit Card?
A secured credit card lets you pay a deposit in order to secure your line of credit. If you don’t make your payments like you should, the credit card company can then take your deposit to cover any losses. It’s a risky business to give credit to someone without a credit history because the lender has no idea how the consumer will actually handle it; the security deposit removes that risk.
Your security deposit is generally what sets your credit limit: With a $600 deposit, you’ll have a $600 credit limit, although there are some cases where you may be able to get a credit limit that is actually higher than your deposit. Because of the deposit that you need to give the credit card company, most issuers require that you first have a bank account before you get a secured credit card.
Using a secured credit card can help you establish good credit if you make all your payments on time and also use the smallest amount of your available credit as possible. This would ideally be less than 30% of your credit limit, but less than 10% would be even better.
What Is a Student Credit Card?
Since the passing of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), consumers that are younger than 21 must show proof of an independent source of income in order to qualify for a credit card on their own. Another aspect of the CARD Act is that it limits credit card issuers’ ability to market credit cards to students on college campuses, and it prohibits credit card issuers from sending anyone younger than 21 pre-approved credit card offers.
There are credit cards for students, however, but you may need a cosigner in order to get one. Some cards will accept applicants with little or no credit history, and these are often offered by local banks. Those with average credit may even be able to get a student credit card that offers rewards.
Why Should I Get a Credit Card?
A credit card is a useful and convenient way to pay for the goods and services that you receive from merchants from all over the world.
Using a credit card, you can res erve a hotel room, plane ticket, or rental car, and you can easily shop online since credit cards offer better fraud protection than debit cards do. Credit cards often reward certain types of spending, which makes this a valuable financial tool. Importantly, a credit card helps people build credit without needing to go into debt. A credit card may also be helpful in case of an emergency.
How Credit Cards Help Your Credit
Your credit standing affects many areas of your life, from the ability to get a loan to renting an apartment to even getting a job. With good credit, you can often get lower interest rates when you apply for a car loan or home mortgage—or even another credit card. Many insurance companies also take into consideration a consumer’s credit when determining their premiums.
Potential employers may check a specific version of your credit report in order to see if you are responsible when it comes to taking care of your financial obligations. Landlords and rental agencies will also often pull a copy of your credit report as a part of their general review process. Utility companies may also check your credit report to determine your rates. Even a cell phone company will often check your credit before they will offer you a service contract.
Being a good credit card customer is a great way to build up your credit record from scratch. When you pay your bill on time each month, you will establish a sound payment history.
How to Compare Credit Card Offers
Once you have looked at a few credit card offers, you will want to take careful note of the terms.
Is there an annual fee? What is this card’s annual percentage rate (APR)? Do they offer an introductory rate? How long does this rate last? What will happen if your payment is late? What is the late fee? Will your interest rate rise if you miss a payment?
The answers to these questions can all be found in the fine print on the back of the card offer. Once you’ve carefully looked over the offers that you qualify for, pick your favorite and then apply.
