Getting your very first credit card is an exciting time of financial independence, but it's important to proceed with caution. We've all heard horror stories of people racking up debt by being a little over enthusiastic with fresh plastic. However, it's easy to make good decisions if you use common sense and do the right research. Find out how to handle your finances like a pro with our first time credit card tips!
Choosing the Best First Time Credit Card
Before you select your plan, it's important to assess all of your options. While there's no definitive best first time credit card, some options will be much better than others for your unique needs. How do you choose the right credit card? Here are a few tips to point you in the right direction:
- Rewards Cards: Rewards cards give you something back when you spend, like cash back or travel miles. Depending on your spending habits, you might enjoy the kickbacks from an incentivized credit card.
- Low-Interest Card: Don't have much credit to your name? A low-interest credit card has a low APR, which helps you build credit slowly while learning the ropes of good financial planning.
- Rotating Category Cards: These credit cards feature different cash back options and rewards rates depending on the time of year. You could reap big benefits if you can keep up with the criteria of the month, but if you don't want to plan that much, you might not see the benefits.
Understanding Your Options
You've picked the category, but what do all these terms mean in the fine print? Be sure to take a second glance and scan for the following:
- APR: The annual percentage rate is the interest rate, and it's one of the most important factors to check. Your APR is variable, and it tends to be higher if you have poor credit and lower if you have good credit.
- Annual Fees: Cards with annual fees often have better benefits than those without, but are the perks worth it? Weigh the pros and cons carefully.
- Sign-Up Bonus: A sign-up bonus can be a nice chunk of change, but double check the terms. Are there higher fees involved? Is this a high-limit credit card? That free money might cost more than you think!
Improving Your Credit
You've researched your credit card options thoroughly, but now it's time to look inward. Do you know your credit history? Do you even have a credit history? No matter your current financial situation, there are always ways to improve your standing - so don't worry! The important thing is to find out an accurate picture of where you are. If you don't have any credit history at all, you can consider a few options to get your first time credit card. You can find a cosigner with good credit to share a credit card with you, so you can qualify for better plans. You can also get a secured card if you have no credit or bad credit. These cards help you build your credit without risk to the lender, which means it's much easier to secure one.