Where Should I Get My First Credit Card?
Navigate the process of selecting and applying for your first credit card with confidence. Build your credit history responsibly.
A first credit card is a foundational tool for establishing a financial identity and building a credit history. This step can unlock future financial opportunities, such as securing loans or renting an apartment. Successfully managing a credit card involves making timely payments and keeping balances low, contributing positively to one’s financial standing.
Understanding Credit Card Options for Beginners
For individuals new to credit, several types of credit cards help establish a credit history.
Secured credit cards are a common starting point, requiring a cash deposit that typically acts as the credit limit. Deposits typically range from $200 to $500, though some cards allow deposits as low as $49 for a $200 credit limit. This deposit minimizes risk for the issuer, making them accessible to those with no credit history. The deposit is usually refundable once the account is closed or upgraded to an unsecured card, assuming responsible usage.
Student credit cards are another option, tailored for college students. These cards often have lenient approval requirements, recognizing students may have limited credit history or income. To qualify, applicants typically need to be at least 18 years old and enrolled in a higher education institution. If under 21, applicants generally must show proof of independent income, which can include income from a job, allowances, or residual amounts from scholarships after educational expenses.
Becoming an authorized user on another person’s credit card can also help build credit. This involves being added to an existing account, allowing the authorized user to make purchases with a card issued in their name. The primary account holder, however, remains solely responsible for all payments. If the primary cardholder manages the account responsibly, the authorized user can benefit from that positive payment history appearing on their credit report, which can help establish or improve their own credit score.
Evaluating Potential Credit Cards
Once familiar with card types, evaluating offers involves examining financial and contractual terms.
The Annual Percentage Rate (APR) represents the interest charged on balances carried over from month to month. While average APRs are around 22-23%, rates for beginner cards might be higher, sometimes 20-25%. Paying the full balance each month avoids interest charges entirely, regardless of the APR.
Annual fees are a yearly charge for having the card. Many beginner-friendly cards, including some secured and student cards, come with no annual fees, which is advantageous for new cardholders building credit without additional costs. Some cards might have an annual fee, which could be justified if the card offers benefits or rewards that outweigh the cost.
Rewards programs offer benefits like cash back, points, or miles on purchases. Cash back cards return a percentage of spending, while points and miles can be redeemed for travel, gift cards, or statement credits. For a first-time cardholder, a simple cash back program or a card with no rewards but a low or no annual fee might be more beneficial than complex points systems.
The credit limit, or maximum amount that can be borrowed, for a first credit card is often modest, typically ranging from $100 to $500. This limit is influenced by factors like income and the absence of a prior credit history. Introductory offers, such as 0% APR periods or sign-up bonuses, can seem appealing, but new cardholders should prioritize responsible spending and on-time payments over these temporary benefits.
Applying for Your First Credit Card
Applying for a first credit card requires providing specific personal and financial information.
Applicants need to provide their full name, current address, date of birth, and a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). Details about employment status, annual income, and monthly housing costs are also requested to assess repayment capability.
To be eligible, an applicant must be at least 18 years old. If between 18 and 20, they generally must demonstrate independent income sufficient to make minimum payments. Without verifiable income, approval for an unsecured card before age 21 is less likely.
Applications can be submitted online via the issuer’s website, or sometimes in person at a bank branch. Online applications often provide a quick decision, sometimes within seconds. After submission, the credit card issuer conducts identity verification and a credit check.
There are three possible outcomes for an application: instant approval, pending review, or denial. If approved, the card’s APR and credit limit are disclosed. Sometimes, a virtual card number is provided for immediate online use before the physical card arrives, which typically takes about 15 business days. If the application is pending review, the issuer needs more time or information, and applicants can check the status online or by phone.