How to Get Your First Credit Card
In many ways, getting your first credit card is one of the most important steps you can take as an adult. It plays an important role in establishing your credit history and improving your credit score. Without it, your options will be limited and you’ll find it harder to build credit; with it, you could be where you want to be in just a few short years.
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However, any old credit card won’t do and how you use that card is just as important as whether or not you acquire it in the first place. Misuse it and you’ll be setting yourself up for failure later in life, joining the tens of millions of Americans in the clutches of debt. Use it properly and you could have a mortgage sooner than planned.
If you’ve yet to acquire your first credit card and have a few questions about how to approach it, this guide is for you.
Getting Your First Credit Card
What follows is a detailed outline of what you need to do to get your first credit card, covering card issuers (MasterCard, Visa), fees (late fees, cash advance fees) monthly payments, and more. If you already have a few cards and are wondering whether another is necessary, skip to our section: Getting Additional Credit Cards at the end of this guide.
1. Check Your Credit Score
The first thing the credit card issuers will do is check your credit report, so this is also the first thing you should do. Your credit report is compiled by the three major credit bureaus (Experian, Equifax, TransUnion). It contains details of all current and past credit accounts, which are entered into an algorithm that builds a score.
You can see this credit report and credit score for free at least once a year, but we recommend using a credit check service to check it every few months and monitor it for changes.
Your credit score range will dictate your options. Obviously, the better your score is, the more benefits and perks you’ll get and the easier the application process will be. More importantly, you’ll be offered better interest rates if you have excellent credit and this could save you immensely. However, there are options for all types of credit score:
Excellent Credit (750 or more)
You need a good credit history to have an excellent credit score, which means it’s highly unlikely you’ll have a score this high if you’re applying for your first credit card. But, it’s not unheard of, and around a third of borrowers have scores that fall within this range, one defined as either “Exceptional” or “Very Good” by FICO and “Good or Excellent” by VantageScore.
At this level, your creditworthiness is high, and your options are limitless. You can get low variable APR, often less than 17%, and you can also apply for premium reward and cash back cards. When looking for a new card, be sure to compare all possible options and calculate any interest rates and rewards against your likely spend.
For instance, there’s no point in paying a $250 annual fee just to get an extra 1% or 2% cashback if you’re only going to be spending $500 a month. The rewards will simply not cover the fee.
Fair to Good Credit (650 to 740)
While premium reward credit cards might be out of the question, you can still get very good cash back rewards as well as low rates of interest. Some of the best cards in the industry, including the Discover It and Chase Freedom, are available for borrowers at this level.
Poor Credit (580 to 649)
Your options begin to thin out at this point, but unsecured credit cards are still within reach. Every point counts for a lot at this range, so if you’re being rejected for the cards you want, it’s worth taking some time to build your credit, using options like credit builder loans, or asking a parent to add you as an authorized user.
You may have more luck if you get a credit card via your bank account provider, assuming you have been with them for at least a few years and have established a degree of trust.
Bad Credit (300 to 579)
You can get a secured credit card with poor or bad credit. Unlike an unsecured card, which doesn’t use any assets or cash as collateral, a secured card requires a security deposit, which the bank will release when the card is closed and take if you ever default on your payments.
These cards work just like their unsecured counterparts in nearly every other way—you can use them to shop online and offline, you can build credit that you repay, and you’ll be given a minimum payment to meet. However, the credit limits are low, the requirements are lower, and the rewards are minimal.
The great thing about these cards is that all activity is reported to the three main credit bureaus, so they will help you to build credit. What’s more, after a few months, the card issuer may offer you an upgrade to an unsecured card with a higher limit.
2. Compare Cards
The average cardholder will focus purely on how much a rewards scheme can earn them and will compare only the rate of rewards. In doing so, they are overlooking many more important features, ones that could cost them more than a rewards program will ever earn.
For example, the average rewards credit card user spends around $9,000 to $11,000 a year. Assuming an average spend of $10,000 and an average rate of 2%, that’s a saving of just $200. This amount can be eclipsed by many commonly overlooked features, such as
- Foreign transaction fees: These fees can be as high as 3%, which means a spend of just $6,700 will offset the money earned through rewards. However, many cards don’t charge any foreign transaction fees at all.
- Annual fees: While these fees are commonly fixed at either $0 or $95, some premium rewards cards charge as much as $550.
- Interest Rate: Generally speaking, rewards programs are only beneficial if your balance doesn’t roll over. If it does, the interest will offset any profits you make. What more, every percentage of APR can greatly increase your outgoings. On a balance of $5,000, an interest rate of 27% may cost you $10,500 in interest if you meet only the minimum payment (interest + 1% of the balance). At just 3% less, you’ll pay $1,200 less.
Before you get excited by the rewards rate or any additional perks (gift cards, statement credit) check the interest charges, late payment fees, and annual fee. Calculate how and where you spend your money over the course of a year and compare these details to your shortlist of chosen credit cards.
The one that earns you the most and costs you the least is the one you should apply for.
You can apply for a credit card online or over the phone. If it’s your first time, we recommend the latter, as they can answer any questions that still need to be addressed and allay any concerns you have. Find the phone number of your credit card company below:
- American Express: 1-800-223-2670
- Bank of America: 1-800-732-9194
- Capital One: 1-800-695-5500
- Chase: 1-800-555-5555
- Citi: 1-800-347-4934
- Discover: 1-800-347-2683
- Wells Fargo: 1-800-932-6736
The easiest way to apply is to respond to one of the many unsolicited letters that creditors send. Contrary to what you might think, these are not sent at random in the hope they’ll lure a few new customers.
Credit card companies run soft credit checks on all applicants before these letters are sent. Known as pre-qualification offers, they are only sent to applicants who already qualify. If you have received one of these credit card offers, it means you qualify for the card being advertised and can simply complete the application to be accepted.
Credit card offer or not, you will be required to meet certain criteria before you can apply for a credit card, including:
- Be at least 21 years old or 18 with parent’s permission or proof of income
- Have a stable source of income (not necessary for secured or student credit cards)
- Have a Social Security Number
- Have a US address
Online applications will be accepted or refused in a matter of minutes, but you may need to wait a little longer if applying over the phone or by mail.
4. Try Again or Activate
If your application is refused, simply try again. You may be hit with a hard credit check, which can reduce your score by between 2 and 5 points, but this has a minimal long-term impact and the benefits provided by a new card are worth taking a few hits for.
To improve your chances of being accepted, ask the lender why you were refused and take their advice on board. If they rejected you because your credit score was too low or your credit history too sparse, apply for a card with fewer requirements.
If your application is accepted, you just need to wait for it to arrive in the mail, which can take anywhere from 5 to 10 days, and then activate it. The card will display specific activation information, but generally, this requires you to visit a web address or phone an automated number.
How to Use Your First Credit Card
Completing the credit card application and receiving your new card is the easy bit, now you need to use it properly. New cardholders tend to spend more than they can afford, focus too much on cash rewards, and quickly get themselves into debt.
In a few years, you may look back on this time and wish you did things differently, as the debt you accumulate today could impact your chances of getting a car loan or mortgage many years in the future.
So, keep the following tips in mind:
1. Pay Off the Balance
Your number 1 priority with any credit card is to clear the balance at the end of the month. Credit cards work by allowing you to accumulate a balance that you then repay at the end of the billing cycle. If you don’t repay it, the balance will roll over, the interest rate will kick in, and you’ll be forever chasing your debt.
Many credit card users begin with the best intentions. They spend sensibly, repay their balance in full every month, and use a credit card as it should be used. But then they hit a rough patch, miss one of those payments, and from that moment on they are stuck chasing a balance.
When this happens, you’ll be required to make a minimum payment every month, most of which is interest. If this minimum payment is all you make, very little of your balance will clear, and if you’re still using the card and accumulating debt, you’ll just dig yourself deeper.
Try to limit your credit card to payments you could afford to make with cash or debit and don’t let the balance get too high. Compare your credit card account to your bank account throughout the month to make sure the balance in the latter can cover the balance in the former.
2. Don’t Get Caught Up in the Rewards
Reward cards encourage you to spend more money, and it works, as research suggests that Americans spend twice as much on reward cards than they do traditional credit cards. Of course, much of this could simply be the result of consumers choosing to put purchases on their cashback cards as opposed to their non cashback cards, but these cards definitely inspire reckless spending.
The trick is to avoid looking at your points balance, don’t focus on how many points a specific purchase will earn, and always base your purchasing decisions on whether you need something and whether you can get it cheaper, not on how many points it will earn.
Many cash back cards will earn you just 1% on common purchases. If you spend $1,000, that’s a saving of just $10. If you’re paying $50 to $100 more just so you can use your credit card and get some points, it means you’re spending up to $100 just to save $10, which is preposterous.
Building credit and covering emergency bills is your main goal as a credit card user. Focus on spending only what you have and you’ll avoid the cycle of persistent debt that so many Americans find themselves in.
3. Use a Balance Transfer Credit Card
If things get out of hand and you have accumulated a large balance with a high-interest rate, it might be time to consider a balance transfer. This is a type of credit card that allows you to move a balance from one card to another. You will pay a balance transfer fee and maybe hit with a higher interest rate, but before that begins you’ll have a 0% intro period, during which you won’t pay any interest on your balance and all your monthly payment will go to the principal.
Again, this can go wrong. If you use a balance transfer credit card just to save yourself a few bucks in interest every month and don’t make a concerted effort to repay the balance, you’ll find yourself in a worse position than you were before applying.
However, if you put all money you have towards clearing that balance during the intro period, whether it means tapping into a savings account, taking on an extra part-time job or simply tightening your belt and making sacrifices, you can make it work and save yourself a lot of money.
4. Avoid Fees
You probably know that your creditor will charge you fees for late payments and partial payments, but did you know you’ll also be hit with fees for withdrawing cash from an ATM or using your card to gamble? In both of these instances, your creditor will hit you with cash advance fees.
Users with limited credit card knowledge may fall victim to these fees, only realizing they exist when they’ve already made those payments and see the resulting expense on their credit card balance.
Getting Additional Credit Cards
Everything discussed above applies to all credit card users, with an emphasis on those applying for the first time. But what if you already have credit cards, should you apply for another, can you apply for another?
Lenders may refuse you if you have multiple credit cards already, but generally, this only happens if those credit cards are carrying large balances or have seriously impacted your credit score.
Every time consumers raise this concern, we like to remind them of Walter Cavanagh, an American who accumulated 1,497 valid credit cards and earned the moniker “Mr. Plastic Fantastic”, as well as an entry in the Guinness Book of Records, or Zheng Xiangchen, who accumulated 1,562 cards to claim the record in the summer of 2019.
Yes, your credit score will take a small hit when you apply for a new account, but as long as you have a good payment history and credit utilization ratio, this impact will be minimal and will disappear before long.
Lenders generally won’t care how many cards you have, unless your sole reason for applying for a new card is because you have maxed out your other ones. If this has happened, your first step should be to apply for a balance transfer card and see if you can clear those balances quickly.
If you can’t get a balance transfer credit card with a credit limit large enough to cover your debt, look into debt consolidation, debt management or debt settlement instead.
Simply adding debt on top of debt is never a good idea and will only compound your misery. For more information, take a look at our guide to paying off credit card debt.