Credit Card Tips: 5 Factors for Picking Your First Credit Card
Whether you've just entered adulthood, graduated college, or simply avoided getting a card until now, your first credit card is a big step. Young adults still in college should take advantage of the less complex finances and responsibilities of university life. It's the perfect time to establish a credit history while learning how to use cards responsibly.
No matter what the current chapter in your life may be, it's a good idea to ask family and friends with solid finances for advice before making any major decisions. They're likely to give you some great relevant credit card tips and teach you how to pick a credit card that's right for your situation.
When doing your own research and evaluating credit card offers, however, be sure to keep these 5 factors in mind.
1. Your needs.
Are there any specific expenses you plan on using your card for? Figure out a ballpark figure for a spending limit that works best for you. Also, keep an eye out for cards that offer special bonuses for everyday purchases you already make. All of this information will inform which credit card tips are relevant when evaluating credit card offers.
One strategy is to get a store card for a nearby supermarket or gas station, which are relatively easy to qualify for. Tying a store card to a necessity like groceries or gas prompts you to use it regularly, building credit. You're also much less likely to accidentally overspend at such establishments compared to a department store or other more general retailer.
2. Your credit rating.
Since this is your first card, your credit rating will depend on things like loans and whether you've had a bill go into collections. This will dictate both which types of cards you can qualify for and which best suit your needs.
Do you need to build credit? The answer for most young adults — and a non-negligible number of older ones — is of course yes. But there's a spectrum of different ratings that full under this category. If you've made every car payment on time and never overlooked a bill, you'll have more choices.
First-time credit card users can try a secured card to help build credit. Many people with bad credit — or a lack of credit history — find that they can't qualify for the "unsecured" cards that make up the majority of credit cards issued, but they can't build credit without a card. Secured cards help these consumers break free from this financial catch-22.
While unsecured cards aren't backed by collateral, a secured card's credit line will equal an initial cash deposit. This may sound like a prepaid debit card, but one major difference is that its account activity is reported to credit bureaus. As its bill is paid on time every month, a secured card gradually builds up credit, giving the consumer access to unsecured cards down the road.
3. Do you have a cosigner?
Especially for consumers under 21, a cosigner will be necessary for first-time cardholders to access the best rates until their "creditworthiness" is proven. This arrangement makes creditors a lot less wary of giving a line of credit to someone without an established history or positive track record. A cosigner assumes responsibility for a credit card's balance if the cardholder fails to keep up with payments.
4. Terms you're comfortable with.
Pay close attention to fees, annual percentage rates (APRs), and interest grace periods. You'll probably hold onto your first credit card for years to come. Make sure it comes with terms you can live with. Keep in mind that you usually won't know the exact APR until you've already applied and been approved for a card. APR varies depending on the cardholder's credit, with around 2 to 3 quoted rates per card.
5. The extras.
This may not be the highest priority, but it's still one to consider. Take a look at rewards (points, airline miles, etc...), signup bonuses, and other perks. If you pay the card off dutifully every month, these extras can amount to a significant amount of "free" money.
If you're trying to find your perfect first credit card, consider applying for one through us here at St. Mary's CU. As a nonprofit organization dedicated to quality customer service, we can provide you with individualized guidance on how to pick a credit card that works for you.