Our team of experts uses a methodology to identify the starter credit cards most likely to fit your needs as a beginner. We examine annual percentage rates, annual fees, issuer satisfaction ratings and other factors to determine what cards come out ahead. Learn more»
What to Know Before Getting a First Credit Card
With a debit card, when you make a payment, the funds are taken directly from your checking account. If you don’t have the money to cover the expense, your card will be declined or you may be charged an overdraft fee. With a credit card, you’re taking out a small loan each time you buy something. Your card issuer pays the merchant, and then the issuer expects you’ll pay the amount back. If you pay your credit card balance completely each month, then you won’t be charged any interest.
You’ll get into trouble if you spend more than you can pay off each month, because you’ll be charged interest on the amount you don’t repay. Current annual percentage rates for credit cards on average range between 15.56% and 22.87%, according to the U.S. News database, so debt can add up fast. You’re required to make a minimum payment each month, but if you just pay the minimum while you make more purchases, your balance will keep growing and you’ll owe more and more.
That’s why it is so important to set a dollar limit for yourself that you know you’ll be able to pay each month.
How to Choose the Right Starter Credit Card
Before you get a first-time credit card, make sure you’re ready for the responsibility. This means you have a budget in place and a way to track your spending.
Once you’re ready to apply for a starter credit card, you need to decide these two things: what type of purchases you want to use the card for and how much you can afford to spend and repay each month.
Decide whether you want a rewards credit card. You won’t have the multitude of choices you’ll have once you start climbing the credit ladder, but some of the best starter cards for building credit offer cash back rewards. Take a look at your budget and see where your big expenses are. This exercise can help you find a starter credit card that will save you some money.
Or a nonrewards card. This is sometimes called a “plain vanilla” credit card, which is good to have while you develop good credit habits. These cards are simple to use, and you won’t be tempted to spend money just to earn rewards.
Don’t exceed the monthly dollar limit. Set a limit for your card that you won’t exceed on a month-to-month basis. Setting a spending limit and sticking to it will prevent overspending, which usually leads to credit card debt.
Consider a secured credit card. They work just like regular credit cards, but you’ll need to make a refundable security deposit to open a secured card. The deposit limits the issuer’s risk in case of default on the debt.
Your credit limit with a secured credit card often equals your deposit, but this can vary among issuers. Many secured credit cards have fees, such as annual fees, late payment fees and returned payment fees, so you need to read the fine print carefully.
A secured credit card is a great way to build a credit history if you use it responsibly. Secured or not, the best credit cards for building credit report your payment history to all three major credit bureaus. Make sure you confirm with the issuer that your payment history will be reported to the bureaus before applying for the card.
What Do You Need to Qualify for a Credit Card
Once you’ve found the best beginner card, the application process is straightforward and easy to do online. Click on a card promotion or go to the card issuer’s website to start applying. In order to apply for your first card, you may need to provide details including:
- Basic contact information.
- Your birthdate and Social Security number.
- Financial information, including your employment status, annual income and rent or mortgage costs.
Note that, as part of the application process, the issuer will check your credit. That will ding your credit score temporarily, so it’s best to only apply to one card at a time. However, if you don’t have a credit score to begin with, then this could result in your first hard inquiry. When available, you can also check to see if you prequalify for the cards you’re considering. This process won’t affect your credit.
When you submit an application, the card issuer will either approve you for the card and set a credit limit for you, or decline your application. If the issuer declines your application, you should receive a letter explaining the decision.
What Is a Good Credit Limit for a Starter Card?
On average, a person’s first credit card will come with a credit limit of $500 to $1,000. However, it can go as low as $100. As you continue to make on-time payments and establish your credit, you can expect that limit to increase.