Thursday, January 26, 2023

What Should Be Your First Credit Card

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Once you have your first credit card, you might be tempted to think of it as access to free money. After all, you just swipe the card and your purchase is covered, right?

Nope. Charging items on a credit card doesnt mean you get them for free. It just means that you dont have to pay for those items right away.

As easy as it may be to charge items to a credit card, remember that youll eventually have to pay back every dollar you spend, plus any interest and fees charged by your credit card company. If you fail to pay back your credit card debt, you could face steep interest and penalty charges not to mention the damage to your credit scores that could follow you for a long time.

Instead, when using a credit card, make sure you know how youre going to pay back each purchase. As a rule of thumb, buy only what you can afford to pay back within 30 days.

Creating and sticking to a budget can help you figure out exactly how much you can afford to charge on your card. And if you spend within your budget, youll never have to choose between paying your credit card bill and covering necessities, like rent and utilities.

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 Just as a purchase on your credit card advances you credit, cash withdrawn on your card provides access to money that is not actually yours.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.

Home Trust Secured Visa*

You might be new to Canada, have a problematic credit history, or are just starting out on your own financially. There are many reasons why you might need to build or rebuild your creditbut whatever the case, youll want to take steps towards achieving a healthy credit score. Thats where the no-fee Home Trust Secured Visa can come in. Unlike with conventional credit cards, its easy to be approved for a secured cardyou just need to be a resident of Canada and have a deposit. The Home Trust Secured Visa tops our list for its low minimum deposit and $0 annual fee. With this card, building your credit score is simple and affordable.

  • Annual fee: $0

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How To Get A Bigger Initial Credit Limit

You may be able to get a higher credit limit on your first credit card by applying jointly with someone who already has an established credit history and good income. Another option is applying for a secured credit card whereby you place a security deposit for the amount of credit you’d like.

For example, you’d make a $2,000 security deposit for a $2,000 credit limit. With a secured credit card, your security deposit is returned to you as long as you keep the account in good standing. Starting with a bigger credit limit, and managing it responsibly, will make it easier to get approved for unsecured credit cards with larger limits. Your security deposit is off-limits until you close your credit card, so only use money you can spare during that time.

Check Your Credit Report And Score

Why The Chase Freedom Unlimited Should Be Your First Credit Card

When you’re ready to apply for your first credit card, a good first step is to check your credit reports and scores. You can get a free copy of your Experian credit report and a free FICO® Score from Experian.

Credit card issuers will generally check your credit reports and a credit score to help determine if you can qualify for a credit card as well as what your interest rate and credit limit will be. The better your credit, the better the chances of getting approved for a card with a low rate and high limit.

If you’ve never had a loan or credit card before, you might not have a credit report or score. You may still be able to qualify for certain credit cards, but your options will be limited until you build up your credit history.

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The Costs Of Bad Credit

Poor credit will limit your borrowing potential. If youre able to get any loan, youll pay high-interest charges as well as more. Employers landlords insurers company cell phone suppliers utility firms often assess potential or future candidates.

A NerdWallet poll has found many people are numb to these effects. It is generally the quickest, easiest way to get new credit cards if you have bad credits or no credit.

A survey found one in five respondents believed a score of 600 if bad credit wasnt bad enough to get a credit card. If you have no credit, it will probably be impossible to use a credit card.

A Credit Card Is Not An Emergency Fund And It Will Fail You In Many Types Of Emergencies

First, if you use a credit card in an emergency, that bill is still going to arrive. If you’ve paid for something that you can’t actually afford, you’re not going to be able to pay off the card. You’ll be carrying a balance, and the interest will keep devouring your money while you get nothing in return.

Second, there are a lot of emergencies where credit cards don’t help. Theft is one. Identity theft is another. What do you do in those emergencies? You should strive to have a cash emergency fund sitting in a savings account at a bank where you can access it if you need it.

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How To Pick The Best First Credit Card

With the vast number of credit card options on the market, choosing the best card for your needs is important. Selecting a card with the right balance of fees and rewards can help ensure you use it for the right reasons and avoid going over your budget.

Whether youre a student or a young adult getting your first card, to understand how to choose the best credit card, its important to learn the different types of cards available.

Credit Card Use Before Age 18

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Although minors cannot apply for a credit card account in their own name, many credit card issuers allow them to be added to an adults account as an authorized user. For example, Discover allows primary account holders to add at no charge so long as the user is at least 15 years old. This could be any family member, friend or person whom the primary cardholder trusts. will receive their own card with their name on it, and can use it to make purchases. Yet the primary account holder is always responsible for making all payments towards the balance of the card.

As older children learn about money and how to make purchases, parents can consider adding them as authorized users to their accounts as a way to begin teaching them responsible credit card use and build their credit history. For example, parents could give their children a credit card to make specific purchases, or for emergency use only.

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Selecting A Rewards Credit Card

Generally speaking, cards that earn you points are usually best used for travel redemptions. These cards will likely give you other ways to cash out your points, but the majority of the time, you get the most value for your points when redeeming for travel. Similar to cash-back cards, you want to pick a card that gives you the most points on the categories you spend the most money. You also want to figure out what type of travel you prefer you could get an airline-branded credit card or a hotel-branded one. There are also credit cards that allow you to redeem for any type of travel. Regardless of what you go with, you need to know how the reward programs work so you can maximize your points.

Qualifying For Your First Credit Card

So now you understand why credit cards are useful. But how do you actually get your first credit card? You’ll need to meet a few basic criteria to qualify for most credit cards:

  • Be at least 18 or older
  • Be a U.S. citizen or a resident with a Social Security Number
  • Have your own checking account
  • Have an independent source of income

The first and last points do require some extra attention. You can qualify for your own credit card at 18 if you have an independent source of income. However, allowances or gifts won’t count as income. If you don’t have your own verifiable income, you’ll need to have a cosigner over the age of 21 with good credit or be over 21 yourself.

Provided you meet these basic requirements, you can apply for your first credit card.

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Look For Low Interest Rates

A low interest rate may minimize the amount of interest youll need to pay if you carry a balance from one statement period to the next. Since promotional rates typically only last a few months, make sure you know what the interest rate will be once the introductory period is over. If you pay your account balance in full each month, you may avoid paying interest altogether.

Is 7 Credit Cards Too Many

Why The Chase Freedom Unlimited Should Be Your First Credit Card

As with almost every question about credit reports and credit scores, the answer depends on your unique credit history and the scoring system your lender is using. “Too many” credit cards for someone else might not be too many for you. There is no specific number of credit cards considered right for all consumers.

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Why Your Limit May Be Low

Credit history is one of the factors credit card issuers use to decide an applicant’s credit limit. A person with a history of managing credit well will have a better chance of getting approved for a bigger . However, because you’re a brand new credit card user, you don’t have a history of using credit cards responsibly. Your credit card issuer doesn’t know how much credit you can handle, so they’ll usually start you off with a small limit.

A Low Credit Score Could Limit Your Options

In addition to the details provided in your application, lenders access information from and the score issued by independent credit reference agencies.

If youve never had, or have very limited experience with credit, its likely youll have a lower credit score, so lenders will find it difficult to assess how well youll manage it. In turn, you may be less likely to get the lowest and longest lasting interest rates, or be approved for credit at all.

Its a good idea, especially if youre planning to apply for credit, to check that the details held by each credit reference agency is accurate. If its not, you could apply to have the information corrected.

You may also have some work to do if you want to improve your credit score and eligibility in future.

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How To Manage Your First Credit Card

Its important to manage your account carefully to keep your benefits and protect your credit score:

  • If you dont make your payments on time or go over your agreed credit limit, in addition to fees and charges, you could lose any introductory or promotional interest rates on your account. If that happens, your standard account interest rates and fees will apply instead.
  • Your credit score could also be affected, which may make it harder to borrow in future, so its important to keep track and manage your account well.
  • You must make at least the minimum payment on time each month, but we recommend paying as much as possible to reduce your balance and the amount of any interest you pay overall. This could also help you to avoid falling into persistent debt.
  • Unless a 0% promotional rate applies, to avoid paying interest on purchases you need to pay off your monthly statement balance in full and on time every month.

Set Up Automatic Payments

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It can take time to get used to paying a bill each month. Protect yourself from late credit card bills by scheduling automatic payments ahead of your due date. Be sure the scheduled payment is more than the minimum paymentideally, for your full balanceand that you have enough funds in your checking account before the payment is scheduled. Otherwise, you may be charged a late fee or a returned payment fee.

Paying on time is also important because payment history is the biggest contributor to your credit score, the three-digit number that lenders use to evaluate your credit usage. Aim to pay every single credit card bill on time to keep your score strong.

Your credit card payment will be due on the same date each month, which makes it easy to keep up with your payment due date.

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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 .

Tips On Using Your First Credit Card

How you use your first credit card can either help or hurt your credit. Here are some things to keep in mind to stay on top of your finances.

1. Make Your Payments on Time

No matter which card youâre approved for, your payment history is an important part of your credit scores. In fact, the FICO credit-scoring model calculates your payment history as 35% of your credit score.

And missed or late credit card payments donât just affect your credit. They can also lead to late fees or an increase in interest rates.

Making at least your cardâs minimum payment on time can help you avoid penalties and keep your account in good standing. Just remember that if you only pay the minimum, youâll likely be charged interest on the balance youâre carrying.

Some credit card companies like Capital One also allow you to set up automatic payments. This way, a payment of your choice is automatically made on your accountâs due date each month. It can be a helpful way of making sure you donât accidentally miss a due date.

2. Keep Your Account Balance Low

In addition to paying your bills on time, staying below your credit limit could also help you improve your credit scores.

Thatâs because your scores are affected by your , or how much of your available credit youâre using. In fact, the Consumer Financial Protection Bureau says experts recommend using no more than 30% of your total limit to help maintain good credit.

3. Stick to a Budget

4. Check Your Monthly Statements

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Discover It Secured Credit Card

The Discover it Secured Credit Card is one of the only secured credit cards that still earns good rewards. Youll put down a minimum of $200 as a security deposit , earn 2% cash back at gas stations and restaurants on up to $1,000 in purchases each quarter you enroll and 1% cash back on everything else. And just like Discovers other rewards credit cards, the issuer will match the cash back you earn at the end of your first year.

Discover waives your first late payment penalty fee, and youll have access to your FICO credit score for free. After youve had the card for eight months, Discover will review your account to see if you are eligible to move to an unsecured card .

The information for the Discover it Secured card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Using your debit card has virtually no point pun intended.

Youre spending money and not getting anything back in return. For all the money you spend on food, clothing, skincare, workout classes, transportation and everything else in your life, you could be earning valuable points or miles toward your next vacation.

Its not going to happen overnight, but we promise the points really do add up. Plus, one day, youre going to want to get a house or a car, and we guarantee some people in suits will be asking you for your credit score.

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