How To Get Your First Credit Card

By Matt

Getting your first credit card can be tricky. Credit card issuers like to see a credit score before issuing credit in order to evaluate your potential worthiness. If you’ve never had a credit card, then you probably won’t have a credit score, which you need to get a credit card. Confusing, right? Fortunately, there are ways to get your first credit card despite the usual requirement for a credit score.

Click here to compare 0% APR credit card offers

Secured and prepaid credit cards

With a secured credit card, the cardholder makes a deposit to act as a security against any purchases made with the card. The credit limit is usually equivalent to the deposit. If the cardholder cannot meet payment obligations, then the deposit will be applied to outstanding payments. Otherwise, a secured card functions very similarly to a regular credit card, including sending reports to credit bureaus. This is a good option if your goal is to build credit or improve your credit score.

A prepaid credit card requires no credit history or credit score check. Essentially, a prepaid card is very similar to a gift card; the difference being that you can use it wherever credit cards are accepted. There is usually a small fee to activate the card combined with small transaction fees.  If you are after the convenience offered by credit cards, the ability to make online purchases, etc., then a prepaid card is your answer. Prepaid cards do not report to credit bureaus, so they are not a viable option for building credit.

Student credit cards

Student credit cards are typically made available to college and university students. The card issuer considers  the fact that students have little income and limited credit history. The risks borne by the issuer are often offset by a higher interest rate.  Be sure to do your research. Don’t jump at the first free T-shirt offered on campus in return for filling out an application.

Click here to compare student credit cards

Three smart philosophies for your first credit card

1. Read the fine print – While this may seem like common sense it is important enough to be underscored. The fine print explains your interest rate and penalties that will be incurred for missed payments and overcharges.
2. Pay off your balance – You’re young and debt free. While there is not much you can do about aging, you do control your debt. Carrying a balance affects your credit score and the interest rate you receive. A credit card is just a piece of plastic if you max out your limit.
3. Consider this an opportunity – Your first credit card is your chance to prove your credit-worthiness. Good behavior will be rewarded with an improved credit score. In the future, you will be able to take advantage of the benefits offered by a clean credit record.

Remember to be careful with your use of credit. The last thing you want to do is wreck your credit rating before you even have one. A bad credit score follows you everywhere, and restricts your financial freedom, regardless of your prospective income. Properly managed credit will ease your ability to obtain future loans for vehicles and a mortgage on your first house.