Getting your first credit card doesn’t have to be a confusing and daunting task. Navigating the process to getting your first credit is not difficult once you understand the various options available. Let’s start off on why you need a credit card in the first place. Here are some of the top reasons why everyone should have a credit card:
- Better fraud protection than debit cards and cash
- Revolving credit is important to a healthy credit profile
- Some types of purchases require a credit card
- Many perks such as discounts, warranty protection, travel points, etc
- Buyer’s protection and ability to dispute charges / file a charge back
Having all those perks can make buying purchases a lot less stressful and if managed properly (by avoiding paying interest), lower the costs of the products and services you buy.
There are three primary ways to get your first credit card:
- Become an authorized user fo a family member
- Get a secured credit card
- Get a student credit card
Authorized User Approach
Becoming an authorized user on a family member’s credit card is the easiest way to get started. Family member’s that add you as an authorized user will share that credit card’s history on to your credit profile. This allows you to start building up a credit profile. So that you can eventually apply for and be approved for your own cards. Depending on the credit card, you can become an authorized user as young as 13 years old. Parents typically add children as authorized users as older teenagers or when they are first heading off to college.
It is important, don’t let irresponsible family members to add you as an authorized user! Therefore, if your family member carries a high balance and makes late payments, then you do not want to be added as an authorized user as that bad history will reflect on your credit report. Thankfully, removing yourself as an authorized user is an easy task that you can do yourself. After removing yourself from their account, the negative history will be erased from your credit profile.
Here is a short video that you could send your parents or close family members about adding you as an authorized user:
Secured Credit Card Approach
Getting a secured credit card is an option that is very common if an authorized user option is not feasible. A secured credit card is one where you send the lender money to “secure” the credit card. The available credit on your credit card will be the amount that you sent in to secure it. For example, if you sent the lender $500, then your credit limit will be $500.
Secured cards are typically easier to get for individuals with little to no credit or bad credit. This funds used to secure the card alleviates the risk to the lender and lets them be more lenient in extending credit.
Many top lenders such as Discover (referral link that on approval you get $100 credit), Capital One, and many others offer secured credit cards. Also, check local options from credit unions as well to see if they offer a secured credit card. Almost all secured credit cards have the option to graduate to a regular card. This means that you will get your initial deposit back after some time. Graduation timeframes vary, but you can expect it be approximately 9 to 12 months. This of course assumes you exhibit responsible behavior and pay your bill on time!
Getting a Student Credit Card
If you are a college student, many companies will offer you a credit card. They will understand that you may not have any or no income, but will give you a student card. In many case, these student cards will offer cash back if you maintain good grades!
When applying for a student card, or any card, you should always use a pre-approval site. Checking for approval on these sites before formally applying can save you from a hard inquiry. Hard inquiries have a negative impact to your credit scores so you want to minimize them when possible.
First Credit Cards to Avoid!
While you may think you should get any card that will approve you, beware! There are many predatory lenders out there that should be avoided at all costs. These lenders offer bad credit cards that typically have these characteristics:
- Application fees
- Monthly and / or high yearly fees for zero benefits or perks
- Extremely high interest rates
- Very hard to cancel processes
- Very low starting credit limits
- Don’t report to all credit bureaus
- No graduation process to a better card
- Use similar names to well known / better cards
These bad credit cards typically will do more harm than good. Only people with extremely negative credit profiles should ever consider such cards. Even then, many times they just make a bad situation worse. Do not pick a card that has more than a couple of the above characteristics if at all possible.
Additional Information
To learn more information, or to quickly share this information with friends and family, watch the video below: