Use These Tips to Choose the Perfect Credit Card
Getting your first credit card is a big step into taking on greater financial independence. With your first credit card comes a lot of responsibility along with more freedom. Two major issues come up when choosing the best first credit card though.
Two Major Challenges of Choosing the Right Credit Card
- The first is that it is very difficult to be approved for a credit card without any credit history; yet, it is likely that without having had a credit card, you don’t have a credit history.
- The second issue is picking an actual card. Credit cards can be very confusing, so picking the best first credit card that will give you independence without tricking you out of your money is absolutely key.
If you are a college student looking for the best first credit card to build credit, then you will have a much easier time than a graduate student or non-student. This is something to consider when you begin college. Although having a credit card can land you in a lot of trouble if you don’t manage your finances well, a responsibly used student credit card can give you a great leg up after college.
Building Trust Early Within Your Financial Life Is Beneficial Down the Road
This is because you will have a credit history that shows you are a trustworthy person who pays their debts on time. Down the line, it’s much easier to get loans or new credit cards if lenders can see concrete information that proves you are very likely to pay them back.
For this reason, it’s very worthwhile to research the best student credit cards and consider applying for one. When you find the best first credit card to build credit in a way that fits your lifestyle, you can get started on the path of mature and responsible financial independence.
So what should you look for when you are looking for a student credit card? The first thing to ask about is the fees. Most student credit cards have no fees, so try to avoid any cards with fees.
Some of the biggest and most well-known companies offering student credit cards are Capital One, Citi, and Chase. Each of companies are banks that have different products, plans and tools, so take a look at what they have to offer and see what suits you.
For example, the Capital One Journey Student Rewards card offers an online tracking tool that helps you understand how you are spending your money. However, it has a relatively high APR, that’s your annual percentage rate or interest rate over a year's timeframe, compared to some other cards.
Unfortunately, this is the cost of not having established credit yet. Other student credit cards to consider include the Discover Student Card or the Citi Forward Student Card, both of which have an introductory 0% APR and great rewards programs.
Be Sure to Review the Card's Rewards Program
Whether you are a student, a new graduate, or just looking for the best first credit card for you, something to think about is how your lifestyle will benefit from any cashback or rewards programs that a card offers.
For example, the Discover Open Road Card for Students is a great option because it gives 2% cashback on gas and restaurant purchases for the first $250 spent each month. However, if you don’t drive or eat out regularly, this reward becomes pointless and you might want to look for a different card with rewards that better match your habits.
Using the Authorized User Feature Is a Option That Can Help You Build Creditworthiness
When you are not a student it can be more difficult to get approved for that first credit card. One trick for establishing credit, in order to get a card to build your own credit, is to have your parents or another family member make you an authorized user on their card. What this means is that you provide your social security number in order to basically join in on the credit line for a card.
You will even receive your own card when you do this that is linked to their account. Don’t think of this as “your” credit card. In fact, the authorized user isn't actually legally obligated to repay the credit card balance. The only reason to do this is because the card payment history will show on the credit report of the authorized user.
If they have established good credit, this opens up your options for finding the best first credit card for you. Suddenly, some of the cards with lower interest rates and better rewards become available because you have become a trustworthy borrower. Of course, this isn’t a good choice for every family and it’s something to discuss carefully. For those who this method doesn’t fit, there are other options.
Don't Forget to Consider Secured Credit Cards
When you are looking for the best first credit card for college graduates or non-students, the Orchard Bank Secured Mastercard is an excellent option. The $35 fee is waived for the first year and is among the lowest for secured cards.
What’s special about a secured card is that you decide your own credit limit within your means and make a deposit in the secured account. This insures the bank by ensuring that they cannot lose money because you cannot spend more than you have actually deposited. This allows you to build credit at your own pace as you can always deposit more money to increase your credit line.
Some cards offer a period of time with 0% APR. This is a great option but you have to be sure to check what it goes up to in order to make sure it’s really a better deal. Also important to check is how your APR is affected by late payments. While it’s always important to pay on time, late payments can have drastically different effects on your specific card costs depending on the card.
Your first credit card is your first opportunity to build a good credit score and the easiest way to do that is to pay on time. To ensure that you can always pay on time, try to think of your credit card as real money and create a realistic budget. If you decide to pay for everything on your card, don’t live outside of your means.
If you’re just getting started, it might be a good idea to spend a few months with an extremely low budget, such as $10 or $20 on your credit card to get used to paying your bill on time. Good credit is easier to build than to rebuild if you don’t manage your credit well.