Establishing a good credit history is essential for many major purchases in your life including buying a car, getting a mortgage for a new home, and taking out insurance policies. With limited or no credit history your ability to access financial products can be limited.
Using a credit card responsibly can help beginners build their creditworthiness. While starter credit cards can come with limited bonuses and perks, they can be a vital tool for helping you establish your credit profile.
Use this guide for beginners to help you choose the best credit card to build your credit profile.
Should I get a starter credit card?
Key components of building your credit profile are the length of your credit history and making on-time repayments. It’s important to establish a positive credit history, as a stronger credit profile can help you to secure lower interest rates on financial products such as loans and mortgages.
A credit card can help people with no credit score build a financial history that gives lenders a perspective on your risk profile. With responsible use of your credit card where you pay your bills on time and keep your credit utilization ratio low (using less than 30% of your credit limit each month), you can start to build your creditworthiness. Plus, there are added incentives, such as cash back rewards and perks to be earned along the way.
However, if you have a history of paying bills late or missing payments, you may want to consider getting your finances in order and practicing responsible financial management before taking out your first credit card.
What are the benefits and disadvantages of getting a credit card for beginners?
Using a credit card is one of the best ways to build a strong credit history. With access to better financial products and more favorable rates, this can help you save a lot of money over time.
- Build credit: With responsible use, you can build your credit profile and upgrade to a credit card with better rewards.
- Low annual fees: Many credit cards for beginners have low annual fees which can be offset with the perks, and others do not charge a fee at all.
- Rewards and cash back: Some credit card issuers offer cash back incentives for using your credit card. For instance, if you use your credit card to make a $100 purchase and receive 5% cash back, you now have $5 to redeem against the rewards offered.
- Small credit line: As a starter credit card, you can be limited in the line of credit you receive. The good news is that many credit card companies offer to increase your credit limit when you consistently pay your bills on time and use your card wisely.
- Interest rates: Many credit cards aimed at beginners can have high-interest rates which can compound over time if you do not pay off your full balance every month. These interest charges can add up quickly and potentially become unmanageable.
- Fewer rewards: Some credit card issuers have limited rewards available.
- Negative credit score impact: If you accidentally miss a payment or max out your credit card each month, this can cause more damage to your credit score than help it.
What are the best credit cards for beginners?
When shopping around for your first credit card, keep in mind the credit rating required, annual fees imposed, the interest rate, and if there are any rewards offered. Here are some beginner credit cards for you to consider:
- Journey Student Rewards from Capital One: With 1% cash back on all purchases, you can increase the reward to 1.25% when paying on time each month. Using the credit card responsibly, you can build your credit profile and be considered for a higher credit limit in as little as 6 months.
- First Digital Mastercard®: While this credit card has a high APR of 35.99%, an annual fee of $75 in the first year, and $48 thereafter, you can build your credit profile with a card that reports to the major credit bureaus.
- Net First Platinum: If you have no credit history, you could receive instant approval with a $750 credit line and 0% APR.
- OpenSky® Secured Visa® Credit Card: With a secured credit card you’ll be required to provide a refundable deposit that matches your credit line. There is no credit check required for this card and you can find out instantly if you are approved.
- Capital One Platinum Credit Card: With no annual fee and the option to increase your credit line in just 6 months, you can build your credit history with responsible use.
- First Progress Platinum Prestige MasterCard® Secured Credit Card: A low-interest credit card for beginners, there is a variable APR of 9.99% and a $49 annual fee. You could get up to $2000 on your credit line.
Top credit card tips for beginners when choosing your first credit card
Finding the best starter credit card can be a time-consuming task and there are various fees and rewards associated with each card provider. Here are a few tips to keep in mind when shopping for your first credit card.
- Reporting to credit bureaus: When taking out your first credit card, it’s important to check that your credit card provider reports to the major credit bureaus (TransUnion, Equifax, and Experian). Every month your payment history which is a key component of your credit score will be sent to consumer bureaus. Without this, there will be a limited impact on your credit score.
- Fees: As rewards can be limited for many credit cards for beginners, it’s a good idea to choose a credit card that has a low or zero annual fee. Plus, keeping this credit card account open and active for the long run can help you preserve the length of your credit history. It’s best to choose a credit card with fewer maintenance costs.
- Rewards: Many credit card issuers offer cash back rewards, which can be a bonus to have while you are building your credit history.
- Interest rates: Starter credit cards can have high-interest rates. Be mindful to read the terms and conditions and understand the variable APR you can be charged if you do not pay your full balance each month.
How to qualify for your first credit card
To apply for a starter credit card, you will need proof of income if you are under 21 years old. If you are over 21 years old, proof of income is not required but it could limit your chances of approval. A cosigner may be required.
To improve your chances of qualifying, it’s a good idea to reduce any outstanding debts you have, and check your credit report for any errors as this could hurt your ability to qualify.
Some card issuers allow you to apply for preapproval before sending in your application. A preapproval can be beneficial as it requires a soft credit check that does not impact your credit score. In addition, it can give you an indication of whether or not you are likely to be approved for the credit card.
Can I get a credit card for beginners with no credit?
There are many options for starter credit cards to help you build your credit profile. If you are a student, you can opt for a student credit card as many of these have low annual fees and attractive rewards.
A secured credit card, where you put down a cash deposit to secure your credit limit, can have fewer requirements for credit history and help you establish your credit rating until you are ready to move onto an unsecured credit card with better options for cash back, travel perks and rewards.
How do I make the most of a credit card for beginners?
The goal of your first credit card is to build your credit score and establish a positive credit history. You’ll want to avoid misuse of your credit card where your credit obligations are not met. Common forms of misuse can include late payments, bankruptcy, high debt balance, and maxed-out credit cards.
Here are a few things you can do to build your credit profile:
- Make payments on time: To avoid penalties, you should aim to make your payments every month on time and ideally pay in full to avoid high-interest charges.
- Keep a low credit utilization ratio: Aim to use less than your available credit limit, typically 30% or less is recommended. Keeping a lower balance can help build a stronger credit profile.
- Monitor your credit score: By keeping an eye on your credit score you can look out for any mistakes that may harm your profile.
- Keep your credit card active over the long term: As your credit card account remains open and active, this will have a positive impact on your credit score.
Explore more credit card options:
- Compare Best Credit Card Offers
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- Secured Credit Cards
- Student Credit Cards
- Travel Credit Cards