Suppose you’re ready for your first credit card. Kudos to you for researching before accepting the first offer you receive. Credit cards are not created equal. Even among introductory credit cards, the terms and benefits differ. Here’s everything you need to know to help you choose the right card for your situation.
Carrying a credit card in your wallet can be financially liberating. With a pre-approved credit limit, interest-free credit of 40-50 days, and value-added benefits on transactions like cashback, rewards, etc., owning a credit card has multiple perks.
A vast customer base is yet to embark on its first credit card journey. For first-timers, there is a clear and present need to familiarize themselves with all the relevant aspects of credit card selection and usage.
how to apply for my first credit card
Before applying, make sure you have a good understanding of credit basics. You should know how credit card interest works (and how to avoid paying it), how credit scores work, and why they matter.
Once you feel confident about using your first card, it’s time to start weighing your options. If you’re a credit newcomer, you won’t have access to most credit cards because issuers don’t have the data to assess how much of a credit risk you are. Nevertheless, there are a few ways by which you can get access to your first credit card account.
Here’s what you need to know about how to get a credit card for the first time:
Become an authorized user
A great way to get your feet wet is to become an authorized user of someone else’s credit card account. You’ll have some access to the account, but the primary cardholder will be responsible for making payments. It is an excellent option if you are under 18. Credit card issuers can only offer you their products once you’re 18 or older, but many allow cardholders to add a minor as an authorized user.
If your parents add you to one of their credit cards, their credit usage will appear on your credit report, helping you quickly get valuable credit history. But there’s a caveat: By piggybacking on someone else’s account, you’re counting on their timely payments to raise your score. If your parents (or anyone you ask) don’t always use credit cards responsibly, having your name on their account could do more harm than good to your score.
You don’t need to have the card in your name or use it in full – as long as your name is on the account, you’re an authorized user. But, it can also be an excellent opportunity to practice being a responsible cardholder. Talk to your parents about the amount they are comfortable with you spending every month and pay them every month to account for what you have spent. It can help you get in the habit of making monthly credit card payments.
Get a Starter Credit Card
If you are over 18, you do not need to ask your guardian for help if you do not want to. But as mentioned, credit card issuers cannot check how responsible you are towards your debt if you have limited or no credit history. For this reason, they may only provide you with their “safer” options, which may not be very exciting. But these cards serve as a gateway to better credit — and better credit card products.
These options include store credit cards, student credit cards, secured credit cards, and credit cards designed for borrowers with no credit or low credit scores. Be careful, though. Some cards targeting people with bad credit don’t offer favorable terms. For example, there’s no point in paying an annual fee for a card that doesn’t offer rewards, especially if it’s a secured card (meaning you paid a deposit to apply for it). ).
Identify important cardholder benefits
Even after you’ve identified which type of credit card will work best for you, you’ll want to compare the different options in that category. Credit card companies offer other perks to their cardholders, so it’s worth shopping around until you find the few best options.
For example, if you love to travel, you’ll want to find a credit card that offers great travel rewards and perks like lounge access and hotel upgrades. If you’re an avid traveler, you want to avoid being stuck with a credit card that charges foreign transaction fees. The daily cardholder perks may be worth more if you’re not an extensive traveler.
When browsing credit cards, consider which ones will benefit you the most with rewards. Do you want a credit card that offers cash back, or do you want to stockpile points and miles? Do you want to save on interest with an introductory 0 percent APR period, or do you want a juicy welcome bonus? What about cellphone insurance, travel accident insurance, or primary auto rental coverage? The right credit card can help you earn while you spend, so carefully consider what will benefit you the most.
How to use a credit card wisely
Once you have a credit card, you’ll want to build good credit habits. Here’s how to use your credit card wisely.
Don’t charge anything you can’t afford
Using a credit card to make large purchases is a great way to earn rewards very quickly, but you should only make large purchases (or any) with a credit card if you know you’ll end up paying more on your bill. Can pay. Month’s
Carrying a balance on your credit card can result in expensive interest payments that will make your purchases cost more than you intended to pay for them. If you need to borrow money for a significant expense that you won’t be able to pay now, it may be worthwhile considering a personal loan, which is likely to have a meager interest rate with a set—repayment plan.
don’t balance without a plan
There may be times when you decide to pay the interest rates and charge less to be able to keep the balance on your card for a more extended period. If you must carry a balance, you must do so only with a plan to pay off your debt before it grows and becomes unmanageable.
Track your spending throughout the month
It’s easy to swipe your credit card at a store or type in a number when checking out online, but it’s equally easy to forget that you used your credit card for monthly purchases.
Keep track of your monthly spending, so you are not hit with a sudden bill. You can do this manually in a notebook or spreadsheet or use an app designed for tracking expenses. Most credit card companies and banks have apps that link to your account, making it easy to review your spending. But hitting it old school with pen and paper works just as well.
Getting your first credit card is exciting, but choose from the best starter cards. Find one that offers favorable terms and lets you get the most out of your credit situation. And once the card is in your wallet, practice good credit habits. You’ll thank yourself for years to come.