If you’re ready for your very first credit card, I’d first like to praise you for doing your research before accepting the first offer you receive. Credit cards aren’t created equal: Even among starter credit cards, terms and benefits vary. Here’s everything you need to know to help you pick the right card for your situation.
Ways to get your first credit card
Before you start applying, make sure you have a good understanding of the basics of credit. You should know how credit card interest works (and how to avoid paying it), as well as how credit scores work and why they matter.
Once you feel confident about using your first card, it’s time to start weighing your options. If you’re a credit newcomer, you probably won’t have access to most credit cards because issuers don’t have the data to assess how much of a credit risk you are. Still, there’s a couple of ways you can get access to your first credit card account.
Become an authorized user
A great way to get your feet wet is to become an authorized user on somebody else’s credit card account. You’ll have some access to the account, but the primary cardholder will be responsible for making payments. This is a great option if you’re younger than 18. Credit card issuers can’t offer you their products unless you’re 18 or older, but many allow cardholders to add a minor as an authorized user.
If your parents add you to one of their credit cards, their credit usage will show up on your credit report, which will help you gain valuable credit history quickly. But there is a caveat: By piggybacking on someone else’s account, you’re relying on their on-time payments to boost your score. If your parent (or whomever else you’d ask) doesn’t always use credit cards responsibly, having your name on their account could do more harm to your score than good.
You don’t even need to have a card in your name or use it all—as long as your name is on the account, you’re an authorized user. But, this could also be a good opportunity to practice being a responsible cardholder. Talk to your parents about an amount they’re comfortable with you spending each month and pay them each month to account for what you spent. This can help you get into the habit of making monthly credit card payments.
Get a starter credit card
If you’re over 18, you don’t have to ask Mom and Dad for help if you don’t want to. But as I’ve mentioned, credit card issuers have no way of checking how responsible with your debt you are if you have limited or no credit history. For that reason, they can only offer you their “safe” options, which might not be too exciting. But these cards serve as a gateway to better credit—and better credit card products.
These options include store credit cards, student credit cards, secured credit cards and credit cards designed for borrowers with no credit or low credit scores. Beware, however, that quite a few cards targeting people with bad credit that don’t offer favorable terms. For instance, there’s no point in paying an annual fee for a card that doesn’t offer rewards, especially if it’s a secured card (meaning you’ve paid a deposit to apply for it). Yet, I’ve seen cards like that on the market.
Best credit cards for beginners
There are many credit cards targeting people who haven’t yet reached good scores (or any scores at all), including a few decent options. Here are my personal favorites:
The Capital One Platinum Secured Credit Card is a wonderful option for building credit, no matter if you’re new to credit or rebuilding it after making some credit card mistakes. I love this card—it has dragged my credit out of the hole I once dug it into. It’s a secured card, so it’s easy to get with any credit situation. You pay a required deposit (up to $200) and get a credit line ($200 or more). After six months of on-time payments, Capital One automatically reviews your credit limit and may increase it. This is good for your credit score if you keep your spending at the same level. After building a history of on-time payments, you may be able to upgrade to one of the issuer’s rewards cards.
Alternatively, you can apply for the Capital One Platinum Credit Card, which is very similar to the Secured card, but requires no deposit. The card is designed for those with a limited credit history, and if you’re new to credit, you may have a good chance of getting approved.
Another great card to look into is the Discover it® Secured Credit Card. This unicorn of a secured card earns rewards—2 percent cash back at restaurants and gas stations (up to $1,000 in combined spending per quarter) and 1 percent on everything else—and charges no annual fee. Moreover, the issuer matches all the cash back you earn in your first year as a cardholder, thanks to Discover’s famous Cashback Match.
If you’re currently working on your degree, you may get even a better deal from Discover in the form of Discover it® Student Cash Back. Available to students, this card earns 5 percent cash back on up to $1,500 in purchases each quarter made in various rotating categories after activation, then 1 percent. You’ll earn 1 percent on all other purchases. If I were a student, I wouldn’t hesitate to pick this card because it’s basically a student version of Discover it® Cash Back, which I have and love deeply.
The last card I’d recommend is the Petal® 2 “Cash Back, No Fees” Visa® Credit Card. I like this card for young people starting their credit journey because it trains you to be responsible by incentivizing on-time payments. You’ll get 1 percent cash back on purchases, which will increase to 1.25 percent after you make six on-time monthly payments and then to 1.5 percent after you make 12 monthly payments on time. Just make sure to pay off the card in full every month, or you’ll have to face a high APR.
These aren’t the only decent options to consider. You can head over to CardMatch to check card offers tailored to your credit profile. This tool only shows offers that you have a good chance of being approved for, so it’s a good place to start.
Getting your very first credit card is exciting, but make sure you’re choosing a card that offers favorable terms and gets you the most you can get with your credit situation. And once the card is in your wallet, practice good credit habits—you’ll be thanking yourself for that for years to come.