Why A Credit Card May Be A Good Option For You
1. Incentives and Rewards
There are plenty of credit cards that offer extra incentives or rewards for cardholders, such as cash back, points, shopping and student discounts, frequent flyer miles and some even offer airport lounge access or rewards at partner merchants. These types of rewards can help you save in the long run and provide perks based on your preferences and interests.
2. Ease of Use and Convenience
Most businesses accept credit cards as a form of payment. This means that wherever you are in the world, your credit card is likely to get accepted, especially if its from a well-known credit card issuer such as Visa and Mastercard. A credit card also decreases the need to carry cash on you.
3. Build Your Credit
A credit card is one of the most popular ways to build credit. As a responsible credit card user, you can easily build a positive credit score to open up financial opportunities for you. A good rule of thumb to boost your credit is to spend what you can pay off the next month in full, maintain on-time payments and have a zero balance on your card.
4. Keep Your Account Secure
5. Track Your Spending
Petal 2 Cash Back No Fees Visa Credit Card: Best For Flat
Why we picked it: Geared toward those with no credit, the Petal® 2 “Cash Back, No Fees” Visa® Credit Card offers a wide credit limit from $300 to $10,000. That $10,000 max is certainly higher than most starter cards, so be careful not to get carried away by buying more things on credit than you can afford.
The flat-rate cash back on this card is quite good as well 1% cash back on eligible purchases and up to 1.5% cash back on eligible purchases after you make 12 on-time monthly payments. Other select merchants may give you even more cash back. It may sound unspectacular, but the flat-rate cash back earns more than you think, and youll increase your credit score while paying your bills regularly.
- Limited redemption options
Who should apply: Anyone with no credit history but a reliable income should apply. Also, if you want the flexibility of an unsecured card and seek to earn cash back, youll like this card.
Who should skip: If that 1% cash back on all purchases sounds awfully attractive and a recipe for disaster, sit this card out. Also, those with bad credit should probably go for a secured card instead. Cardholders with reliable payment history whod like to earn a bit more rewards can also continue shopping around.
Tip #4 Cash Advances Are Not The Same As Debit Card Withdrawals
While it may look similar, withdrawing money on a credit card is not the same as accessing money from your current account using your debit card. As the name suggests, a cash advance provides you an advance in cash. Just as a purchase on your credit card advances you credit, cash withdrawn on your card provides access to money that is not actually yours. Its your lenders.
Your lender will allow you to borrow money using your credit card using the cash advance feature, but it comes at a cost.
- You will usually pay a higher rate of interest on cash advances, up to 25% p.a. depending on the card.
- You will usually pay a fee for each cash advance.
- When you take out a cash advance, there are typically no interest free days on that transaction, which means that high rate of interest starts to accrue from day 1.
Its best to avoid cash advances whenever possible. Just pretend the feature doesnt exist.
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Know Where To Go To Get Your First Credit Card
If you’re enrolled in college, you have a good chance of getting approved for a student credit card from a major credit card issuer. However, some student credit cards have high interest rates and annual fees, both bad options for a first credit card.
If you’ve been responsible with a checking or savings account, try applying for your first credit card at your bank. An existing banking relationship can improve your chances of getting a credit card application approved, especially if youve handled your account responsibly. You can apply online, but visiting a bank branch would put you face-to-face with a representative who may have more authority to get your application approved.
Retail and department stores typically have more favorable approval odds. On the downside, they have high interest rates that make it expensive to carry a balance from one month to the next. Another downside of these cards is they aren’t versatileyou can use them only in that store. However, retailers often encourage spending by offering discounts for using the card and having a retail store credit card as your first credit card can help you build up a good enough credit history to apply for a major credit card within a few months.
How To Get A Credit Card That Isnt A Credit Builder Card
A credit builder card is a stepping stone to getting one of these other types of cards. Although you might not be able to get any of these for your very first credit card, you might be able to once youve had a credit builder card for a while.
First focus on how to get a credit card, then work on managing it responsibly. Once youve done that, you should be able to progress to one of these types of cards:
0% on purchases: This means you won’t pay interest on what you spend on your card for a fixed period.
0% on balance transfers: If you had another credit card with a balance charging you an APR, you could switch it to a 0% deal to cut out interest.
0% on money transfers: This lets you transfer most of the card balance to your current account. Theres usually a transfer charge for this.
Air miles: This type of card gives you air miles for spending a certain amount on your credit card.
Rewards: You can find rewards like cashback, giving you a percentage back on what you spend. For example, this could be 0.5%.
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Why Your Credit Score Matters
To qualify for the most competitive credit cards, youll also need an excellent . However, if youve never borrowed before, its unlikely youll have much of a credit history if you have on at all, and your credit score may be low as a result.
Before you even think about applying for a credit card, its therefore worth checking your credit score using an online service.
Having access to your credit report will help you understand how likely you are to be accepted for a credit card, and many of these services will also offer tips on what you can do to improve your score. This could include:
- making sure you are registered on the electoral roll
- getting your name on bills such as a mobile phone contract or energy bill
- paying bills on time
Use Your Credit Card Responsibly
A credit card can make dealing with finances more rewarding and convenient, but it can be easy to get carried away. Purchases used via credit can stack up quickly, and before you know it, you may accrue more debt than you can handle. This can have long-lasting damage to your credit score and future finances.
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Review Tips On How To Use A Credit Card Responsibly
Using a credit card responsibly can help you build credit over time. Thatâs because credit card issuers report payment and balance information to the credit bureaus. That information appears in your and is then used to calculate your .
The CFPB recommends a few ways to use your credit card responsibly and maintain healthy credit:
Understand The Credit Card Landscape For Young Adults
Getting approved for a first credit card can be tough, especially if you’re younger than 21 and more so if you don’t have a job.
Federal law requires adults younger than 21 to have verifiable income before they can be approved for a credit card without a cosigner. Income must be from a job. However, child support or government benefits may allow you to be approved.
If you dont have income, then youll have to find someone whos willing to open a joint credit card with you or make you an authorized user on one of their credit cards.
Another thing that makes it tough to get a first credit card is an insufficient .
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Your Credit Card Options
When youre young, your credit card options may be more limited until youve had a chance to establish your credit history and start generating a steady income. To qualify for top rewards credit cards, you need a high credit score and high income.
That being said, there are some solid starter credit card options on the market for those who are about to, or just started, their careers, and using these credit cards responsibly can actually help you build your credit score and boost your future odds of being approved for better options.
Understand What A Credit Card Isand Isnt
But despite a credit cards benefits, its important for first time credit cardholders to understand that a credit card isnt a source of free money. You must pay back every purchase. And if you dont pay off your balance in full each month, the remaining debt usually starts to accrue interestwhich can quickly spiral out of control if youre not careful.
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How To Get Your First Credit Card
At Experian, one of our priorities is consumer credit and finance education. This post may contain links and references to one or more of our partners, but we provide an objective view to help you make the best decisions. For more information, see our .
In this article:
Opening and using credit cards responsibly is one of the best ways to build a strong credit history. If you don’t already have a credit card, here’s what you need to know to get your first one.
Before you get your first card, your first step should be to check your credit reports and scores. You’ll want to make sure that the information in your credit reports at all three credit bureaus is accurate. With so many different on the market, knowing your credit history and scores will help you apply only for the cards you are most likely to be approved for. Checking your own credit reports does not hurt your credit scores and is a crucial first step to opening up new credit possibilities.
What Methodology Did We Use
From our research , we ranked the top first credit cards by the following factors:
- Interest rate: the representative APR youll be charged
- the amount youll be able to borrow on the card to fund your spending, according to your circumstances
- Perks: any incentives or benefits attached to the card, whether upfront or ongoing
A few points to note:
- There is a good chance the APR you see advertised will not be the one you are offered. Advertised APRs are representative which means they must only apply to 51% of successful applicants
- You may need to demonstrate a certain level of income per annum to qualify
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Secured Vs Unsecured Credit Cards
A credit card is a type of loan that you can borrow from again and again as long as you pay it back. Despite what you may have thought until this point, a credit card is not free money. As you take on the responsibility of having a credit card, keep in mind that you have to repay everything you borrow. This type of credit card is known as an unsecured card because the loan made to you is not secured by any type of collateral.
Without an established credit history, theres a chance you could get denied for an unsecured card, especially if youre applying for a credit card thats intended for someone with good or excellent credit.
Students can improve their chances of being approved by applying for a student credit card. If you are denied, the credit card issuer will send a letter telling you the specific reasons for the denial. Once you get that letter, use the information to help you apply for a better-suited credit card next time.
Some banks offer secured credit cards for people that have no credit or have had issues in the past and need to rebuild their credit. These cards require a cash deposit to secure the card. As you use the card and pay responsibly, in many cases, you can reduce the amount of cash you need to keep on deposit, and at some point may be able to convert the card to an unsecured card.
Think Twice About Ever Canceling Your Credit Card Especially Your First One
Your first credit card will have a big impact on your credit history. And as long as you use it responsibly, that impact can be very positive. Credit cards not only let you afford the basics, like everyday expenses, but they can earn you rewards when you charge and help you qualify for lower interest rates on loans.
Canceling your credit card can be harmful to your credit score, especially if it’s your oldest card. It will bring down the average age of your account, but perhaps more importantly it will decrease your overall credit limit, which is one of the most important factors in calculating your credit score.
While there are scenarios where it may make sense to close a credit card, such as you’re paying an annual fee on a card you no longer use or you are incurring a high interest rate, you should check first how your credit score will be affected. You can use online score simulators, such as from Capital One, to help you make the most informed decision.
For rates and fees of the Discover it® Student Cash Back, click here.
For rates and fees of the Discover it® Secured Credit Card, click here.
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Choosing The Best Card For A First
Consider applying for a Secured Credit Card or a Student Credit Card
With secured cards, your credit line will equal the amount of the required one-time cash deposit after you are approved. The difference between this and a debit card is that your on-time payments help build credit with responsible use.*
Also consider a student credit card with a low annual percentage rate and a rewards program. You could earn cash back on purchases that will come in handy when its time to buy books.
Learn about credit card rewards
Student credit cards with rewards are just one type of the hundreds of rewards cards available. With so many different rewards cards to choose from, it can be challenging to find the right card. Since rewards are earned based on the amount of your purchases, identify what you want out of your credit card and apply for cards that make the most sense for your lifestyle and spending habits. For example, Discover it® Chrome gives you 2 percent cash back on gas stations and restaurants on up to $1,000 in combined purchases each quarter.*
Be sure to pay attention to annual fees when evaluating rewards card offers. If you find yourself carrying a balance consistently, you may want to switch to a non-rewards card with a lower APR.
Choose a credit card you wont want to cancel
Tip #5 You Can Avoid Fees And Costs By Making Smart Decisions
Aside from receiving invitations to apply for credit cards through the post, you may find temptation to apply elsewhere as well. Credit card providers may set up shop at college and university orientation weeks, offering sign-up bonuses such as t-shirts, pens and hats to unsuspecting students starting their journey into tertiary education.
If you have looked at credit cards online, you may soon find your social media feed clogged with credit card ads, most likely unsuited to your needs. These ads show feature-packed cards with enticing introductory offers, which usually have high annual fees and interest. But, what you may not know as a first-time cardholder is that credit cards dont have to be expensive.
Interest: You can avoid interest by shunning cash advances, and by only spending what you can afford to pay back at the end of each month. Choosing a card with up to 44 days or 55 days interest free, you can avoid interest accruing by always clearing your balance by the due date.
Annual Fees: By choosing a card with no annual fee, you can avoid that yearly outgoing to save money. These cards are typically no frills, but this can make it easier for you to manage as you get used to dealing with credit.
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Ensure That Your First Credit Card Application Will Be Approved
Limit the number of applications
Be wary of applying for too many credit cards at once. Too many credit providers inquiring about your history in a short period of time can have a negative impact on your score. It may appear that you are either having a hard time being accepted or are about to take on more debt. These are known as hard inquiries into your credit history. Soft inquiries such as requesting your own credit report, employers checking your background and lenders looking to pre-approve you for a loan do not have the same negative effect.
Avoid signing up for too many credit cards at once by only applying for the ones youre most likely to qualify for based on your current credit score.
Prove you can make credit card payments
To get approved for a credit card, youll need to provide proof that you have the ability to make payments. Credit card companies may need to verify your income to determine if you qualify for credit. They may also review your current obligations by obtaining information such as the amount of rent payments.
If you are a student you may also need to provide information such as your college or universitys name, state and city and proof that you are currently enrolled.
If youre under 21 and can show you have enough independent income, you may be able to get a student credit card on your own.