Applying for your first credit card is a very exciting time in life. With so many credit cards around on the market though this task may be very daunting. Here in this post, I will point out some things to consider in order to help you be a smart consumer when choosing your first card. Here is what you should consider when picking your first credit card.
1. The fancy cards are not for beginners
When you’re applying for your first credit card, you probably haven’t gotten much credit yet. Therefore, you may want to look for a card that is easy to get approved for. At this point, it’s not the time to look for fancy travel cards which are typically tough to get approved for.
I usually have good experience with the Capital One Journey and the Chase Freedom Student card (if you have a Chase bank account open for at least six months) for newcomers. Discover It can also sometimes be approved easily for newcomers. Check out here for a list of easy credit cards to get approved for.
You may also want to check out the post: How To Get Approved For Your First Credit Card- 5 Actionable Tips
2. Choose cards with no annual fees
The first three credit cards that you apply for should be credit cards that don’t have an annual fee. The reason for this is because in order for you to build credit properly, you need to build up a proper credit history. That being understood, it’s important that the first three credit cards you open should never be closed. That will give your credit strong legs to stand on. This will definitely help you in the long run to build proper credit.
If you make the mistake and apply for a first credit card which does have an annual fee, what will you do if in 5 years from now you don’t want to pay the annual fee anymore? Therefore, it is smart to just apply for a credit card with no annual fee (for your first three credit cards), so that you never have to worry about keeping them open.
3. Don't sweat about your credit limit
For your first credit card don’t be too focused on getting approved for a high credit limit. Higher credit limits do not help you build credit. They just give you bigger spending power. Be happy even with a lower credit limit and just make sure to spend below 9% of your credit limit.
High credit limits come with time. First, you need to prove yourself credit-worthy. Climb the ladder but don’t skip any steps. First focus to get approved for a card even with a small credit limit and eventually after making a few months of on-time payments (usually six months) you can request the bank to increase your limits.
4. Split up the cards between different banks
The first three credit cards you apply for should be split up between three different banks. The reason for this is, first of all, because, in the long run, it will be easier for you to get approved for higher credit lines by these banks as you will have had a longer relationship.
Second, because it is so important for you to never close these credit cards and that these credit cards should never get closed down. So it is beneficial not to keep all your eggs in one basket. Just in case this bank decides to close you down (if you ever have a bounced check, etc.), you won’t lose all of your first few credit cards.
5. The faster you get approved for your first credit card the better
When people ask me when is the best time to start building credit I answer yesterday. But if it did not happen yesterday then do it today! Being proactive and getting your first few cards early on in life will help you, in the long run, to build a solid credit history sooner, faster and better.
6. Choose cards that report payments to all three credit bureaus
Your first three credit cards should be cards that will help you build credit history with the credit bureaus. Choose a card that reports your payments to all three credit bureaus.
Most big banks report on-time payments to all three credit bureaus. But, they only report on-time payment for personal cards, not business cards. When applying for your first few cards make sure to choose personal cards not business cards as the business cards will not help you establish proper credit.
7. Getting denied for a credit card sounds scarier than it really is
When applying for your first credit card even the smartest consumers can get a denial. Don’t take it personally and don’t sweat too much about it.
Getting declined for a credit card does not get reported to the credit bureaus and does not affect your credit in any way. I will rephrase it as my words might be a bit misleading.
When applying for a credit card the bank will always pull your credit report to check your credit. This is called a credit inquiry. Credit inquiries are done regardless if you get approved for the card or declined. A credit inquiry has a slight effect on your credit score. But, there is no additional effect for when the application ends up getting declined.