credit card is a stepping stone to good financial health. They help you build the credit history required to borrow mortgage or auto loans. But, to get a credit card, you need good credit history and having a credit card is essential to building up your credit. It is a weird relationship that makes you feel dizzy.
Fortunately, there are provisions and considerations for first-time credit card applicants. But then, the first step is always tricky, and so is getting the first credit card. There are many things to remember and consider as your first credit card can make and break your credit history.
Here's the complete guide to getting your first credit card :
Are You Eligible For A Credit Card?
To apply for a credit card, you need to meet specific requirements. It differs according to the credit card lender. However, here are some general eligibility requirements for credit cards:
You need to be at least 18 years to apply for a credit card. However, being eligible does not mean you are guaranteed a credit card. Though the legal age for getting a credit card is 18, it can be pretty hard to get approved for a credit card until you are 21.
Most credit card issuers require the credit card application to be a U.S. citizen or permanent resident of the U.S. However, some also provide cards to international applicants.
You have to show sufficient income to show that you can repay the credit card balance. If you are a student and have no income, you can put your annual income from your part-time job or have reasonable access to your parent's income. If not, you can opt for secured credit cards that do not require income.
In general, you must have a good credit history to obtain a credit card. Your credit score and history determine the interest rate of your credit card. Since beginners do not have a credit history, some credit cards consider applicants with low or no credit history. But, if you have gone bankrupt or have a county court judgment, you might be rejected for the credit card.
You must have a good credit score to qualify for a credit card. Some issuers also issue credit cards to people with bad and low credit scores, but they are expensive.
How To Choose Right Credit Cards As A Beginners?
Although a wide variety of credit cards are available, most have strict income and credit history requirements. It's easier for the working professional to qualify for a credit card as they have verifiable income sources and credit profiles. But, if you are a student, you probably don't have a job or a credit profile. Luckily, there are cards designed specifically for those just starting with credit. You may consider the following credit card options:
Secured Credit Card
Secured credit cards are the best credit card if you are trying to build your credit profile. For the card, you must deposit a certain amount of money which acts as collateral in case the cardholder cannot make payments. Your credit card limits are based on how much money you have put down for the deposit.
Suppose if you deposit a $20,000 security deposit, you will get the credit limit of the same. Some credit card issuers refund the deposit if you have made timely payments and built a good credit profile.
Suppose you are younger than 18 years old but want to use a credit card. You can become an authorized user on another person's credit card. You can ask your parents to add you as an authorized user on their credit cards. This helps you build your credit history early to get your first credit card quickly. But, the downside is that your credit history will also be affected if your parents fail to make the timely payment.
Student Credit Cards
The credit card companies offer unique cards dedicated to students. These cards require less or no credit history requirements and are perfect for students trying to build up their credit history. Student credit cards are usually cheap and have a lower credit limit.
Store Credit Cards
If you shop a lot and want to build credit scores based on that, store credit cards can be a great option. Store credit cards (also known as retail credit cards) are credit card that allows you to make purchases and pay down the balance later in the billing cycle. The store credit cards are best if you shop a lot and want to build your credit profile. But, the downside is that the cards can only be used in the stores specified by the issuer.
Co-signed Credit Cards
The credit card issuers consider people with no/low credit history as high-risk customers. Thus, they are reluctant to borrow your money or charge high interest due to the high risk. But, if you apply for co-signed credit cards, your risk is shared with your co-signer. A co-signer is someone who agrees to pay off your debt in case you fail to pay. However, there are limited issuers who offer co-signed credit cards.
What Is Needed To Apply For A Credit Card?
Though the requirement differs from the credit companies, you are generally required to fill out the following information :
- Personal Information (Full legal name, date of birth, age, gender, etc.)
- Social security number
- Contact details (Email address, Phone number)
- Residential address
- Employment status
- Total annual income
- Bank account details
- Assets and Liabilities
- Card preferences
- Additional cardholders and their details
What To Look For Before Applying For First Credit Card?
Some credit cards will charge an annual fee for using the card. Being a first-time credit card holder, you should look for a credit card with no annual fees. This is because your first credit card will impact your credit score the most. As you build your credit score, you will be eligible for cheaper credit cards. Thus, you wouldn't want to use your first credit card anymore. But, since the annual fee is charged, you will have two options: either to keep using the card or to close the card. If you close the card with annual fees, it will have a massive impact on your credit score.
Annual Percentage Rate (APR)
The annual percentage rate is the interest rate you need to pay on your credit card if you do not pay your credit card bills on time. The interest rate varies as per your credit score. While the APR won't be an issue if you pay your card on time, you should know the cost of a credit card if you fail to do so. Usually, first credit cards have a comparatively higher interest rate but look for cheaper ones if possible.
It's important to know that not all credit cards have a reward system, but it's better to opt for the cards with one. Card rewards are based on cashback rewards, cash bonus rewards, or a points-based system equivalent to cash.
Credit Card Issuers
There are many credit card issuers, but choosing the best ones is essential. The issuers you choose might make or break your experience with a credit card. Since you are new to the credit business, you must get your cards from reputed credit card companies. Some A-tier credit card companies include Discover, American Express, and Chase.
After you have narrowed down your options, check if the cards can be preapproved. Preapproval of credit cards means the credit issuer prescreens your personal and credit profile to see if you meet the minimum requirement. To do that, they complete a soft inquiry that does not impact the credit score. If they find you are eligible for the credit card, they call you to apply for the credit card. But, a preapproved credit card does not mean your credit card is approved. It protects you from the hard inquiries done otherwise.
Best Credit Cards For Beginners
Discover I.T. Secured Card is the best option if you have no credit score or history and are looking for a secured credit card. The card also offers cashback and a welcome bonus with no annual fee. Also, applying for a credit card does not require a credit score. You can establish your credit card with a refundable minimum deposit of at least $200 for the same credit line amount. You can increase the deposit amount depending on your needed credit line. Also, the APR can range around 24.49% variable APR.
- No annual fee
- Cash back rewards despite being secured card
- No credit history is required to apply
- Free FICO score
- Refundable deposit after seven months
- Requires refundable deposit
- Capped rewards
If you have a budding credit history and want to apply for a credit card, then Petal 2 VISA Credit Card can be your best option. The card is dedicated to people with limited and no credit history and scores. It offers no fees and plenty of cashback rewards. You can earn 1% cash back on eligible purchases and 2%to 10% cashback at selected merchants. Also, you can qualify for $300-$10,000 credit limits at 15.24% to 29.24% variable APR.
- No fees
- No security deposit required
- No good credit history required
- No cash advances
- Applicants with bad credit history cannot apply.
- No welcome bonus
If you want to build up your credit profile and earn several rewards and bonuses, then Chase Freedom Flex Card is a perfect credit card for you. It comes with a welcome bonus of $200 after you have spent $500 in the first three months. It has plenty of cashback schemes where you can earn up to 5% cash back for every purchase. Also, there is no minimum to redeem for the cashback, and these rewards never expire as long as your account is open.
- No annual fee
- 5% cash back
- Best travel rewards rate
- 0% intro APR for the first 15 months
- Free credit monitoring
- Complicated reward system
Discover I.T. Student Cash back credit cards are the best option if you are a student looking to build your credit. It has no annual fee and an introductory 0% APR for six months, and then the standard variable purchase APR is 14.49% to 23.49%, based on your credit profile. It also offers several cashback rewards.
- 5% cash back
- Unlimited Cashback match
- No annual fee
- No credit score required
- Free FICO score
- Complicated reward system
- Only for students
If you are an international student without a credit history and social security number, Deserve® EDU Mastercard for Students is your best credit card. It offers no annual fee and a 1% cashback reward. Also, there are no international transaction fees on purchases abroad, so you can easily travel. There is also an unlimited referral bonus where you can earn $30 per referral. The APR is around 20.99% variable.
- No annual fee
- No social security number is required.
- No foreign transaction fees
- Referral bonus
- Amazon prime student for a year
- Low cashback rewards
- No welcome bonus offers
How To Apply For A Credit Card?
After you have done your homework and selected the best credit card, it's time for you to apply for the credit card. Applying for a credit card can be a nerve-wracking experience as there isn't guaranteed approval. You can apply for a credit card online or through a local bank. It's recommended to apply online, though, as it is convenient and fast.
If you are applying online, follow these steps :
- Visit the selected credit card issuer website and the card type they offer.
- Review the card's features and terms.
- Click on the Apply Now button and fill out the online application form.
- Read the fine print of the terms and conditions. Focus on interest, fees, rewards, and conditions carefully.
- Submit your application
Once you have submitted your application and provided them with the required information and documents, sit back and wait for the decision. It takes around 10 to 14 business days for a decision to be made.
The card issuer will send you the decision letter in your email or mail. There are three potential responses:
- Approved: If you are approved for the credit card, you will receive the card within 15 days. After receiving the card, activate it, and you can now make purchases.
- Rejected: If you get denied for your credit card, it's not the end of the world. You need to figure out why your application was rejected and work on it and then apply again. But don't apply for the same card again. Some lenders require you to wait for six months before applying again.
- Pending: In some cases, the card issuer may request additional information from you. The final decision is made after you have provided the additional information required.
Managing Your First Credit Card
Credit cards can make or break your credit profile. It all depends on how you use them. The impact of your first credit card is high; thus, you should use it wisely to boost your credit profile.
It would be best if you aimed to pay off your credit balances fully and without delay. By doing this, you can avoid paying a high-interest rate and build your credit profile.
Credit cards are a great way to build up your credit. However, getting your first credit card can be tricky since you need good credit history to get them. Luckily, there are beginners' credit cards that require no prior credit history and work as a stepping stone for the credit journey. But, it would be best if you did proper research to choose the best credit card for your needs, as they can significantly impact your credit history.