How to Get a Credit Card and First Time Credit Card Options

Credit Cards shutterstock_339318890

Applying for a credit card is an important step in everyone’s financial journey.

In fact, not having a credit card can make some everyday life tasks difficult – in some cases, even impossible. Renting a car, buying airline tickets, and reserving hotels all typically require the use of a credit card.

How you use your credit card can affect your credit score. Your credit score can determine whether or not you’ll be approved for certain financial products like auto loans and home mortgages in the future.

These are just a few of the reasons why it’s imperative for you to start your credit history as soon as you’re financially capable.

We’ve outlined a few steps on how to get a credit card so you can better your chances of getting approved for one, even if you currently have little or no credit. We’ve also outlined which cards may make sense for you based on your situation.

Looking for the answer to a specific question? Use the jump links below to navigate.

  1. How to Get a Credit Card
  2. How to Get a Credit Card with No Credit
  3. How to Find the Best Card for You
  4. What’s a Store Credit Card?
  5. What’s a Student Credit Card?
  6. What is a Secured Credit Card?
  7. What Does it Mean to Become an Authorized Credit Card User?
  8. What Does Annual Income Mean When Applying for a Credit Card?
  9. What if My Credit Card Application Gets Rejected?
  10. How are Credit Scores Weighted?
  11. Final Thoughts on Your First Credit Card

How to Get a Credit Card

Before you get a credit card, it’s important to be confident you’re actually ready for one.

The reality of how Americans use credit cards is bleak.  In the U.S., we carry a monthly balance of about $687 billion and only 29% of credit card balances are paid off each month.

The average credit card balance is $6,348 for card holders in the U.S., but this number doesn’t include retail store credit cards, which have a balance averaging $1,841.

Obviously, major credit card debt is a substantial issue in the financial landscape. If you’re a savvy credit card user, however, you can avoid the burden of interest rates and the financial stress of bad credit and debt. Let’s delve into how to get a credit card the right way.

How to Get a Credit Card with No Credit

Maybe you’re a student who just turned 18, you’re working a part-time job at a retail store and plan on attending college. You might think you have no chance of getting a credit card, but you’d be mistaken; just because you’re a young adult with no credit history doesn’t mean it’s impossible.

It’s true you won’t have a credit report until you have one active account for at least 6 months, but some credit card companies offer starter cards for people with no or little credit.

First, you’ll need to have stable employment, either full-time or part-time, especially if you are between the ages of 18 and 21.

The income you write on your credit card application has to be your own, but there are some exceptions. You can use “household income” if you have a spouse or other form of income.

The more money you make, the better your chances are for getting approved for a credit card. With a higher income, you may also get a higher credit limit; your higher earnings signal you may be able to take on – and pay off – bigger debts.

How to Find the Best Card for You

Research different cards and companies. You’ll need to tailor your search based on your credit score or lack thereof. If you get pre-approved for a card, you will be more familiar with the type of card you’ll be able to get. Take the time to comprehensively read reviews of credit cards to find the winners.

Find a card that fits in with your lifestyle. It’s in your best personal and financial interest to get a credit card that matches your lifestyle. Travel a lot? It may make sense for you to look into a travel rewards card. Grocery shop and cook most days of the week? Consider a credit card offer that gives you cashback at supermarkets.

Read the fine print, it’s there for a reason. That tiny print holds a lot of important information so whip out a magnifying glass – this is where you’ll find all the terms and conditions of the credit card. This section also details when you’ll pay fees for late payments.

To build and keep a good credit score, it’s important to use 30% or lower of your total available credit. The aim with a credit card is not to max it out each month; in fact, this lowers your credit score. Using just 30% shows creditors you’re not desperate for credit and that you may be more likely to pay off the balance each month.

Don’t fall for flashy introductory offers. Make sure you read into credit card offers beyond the sign-up bonus or other perks that can draw you in initially.

Don’t miss payments or carry a balance. One missed payment can follow you for 7 years on your credit history and damage your overall score. Ideally, set up automatic payments so you’ll never miss a month.

Don’t carry over a balance either, if you can help it. This keeps you from paying interest fees and service charges. If that’s not possible, try to pay more than the minimum required so you avoid higher overall accrued interest.

Don’t open multiple credit lines at once or eliminate old accounts. Consider keeping older accounts open because they help bolster your credit and financial history. Limit your applications for lines of credit (one is plenty to start with) because multiple hard inquiries can be damaging to your credit.

What’s a Store Credit Card?

Retail store cards are one of the easiest credit cards to get approved for because stores want you to get them – little to no credit history is rarely a barrier. Store credit cards are an easy way to get customers to overspend in search of rewards.

If you decide to apply for one, you’ll only be able to use that credit card at that particular store but it will give you the ability to start and maintain your credit history.

However, here’s a word of caution against store credit cards: they usually have low credit card limits with very high interest rates. It’s in your best interest to pay off the balance in full each month. Zero percent financing offers can hook store credit card applicants. However, that 0% might disappear after a year and then you get hit with fees and interest charges.

You’ll also likely have a higher credit utilization (remember: you want to keep that number under 30%) because the credit limits are significantly lower than regular credit cards. When you use a higher level of your available credit, it can ding your overall score.

The average American customer has 2.5 store cards so they’re a popular choice despite their drawbacks. Consumers choose them because they offer perks like points and discounts on products.

If you’re set on getting a store credit card, it’s important to note that if a store goes out of business, it doesn’t absolve your credit card balance. The card issuer that holds the credit loan and card-issuing bank still exist, and you owe payment of that debt to them.

What’s a Student Credit Card?

One of the best credit cards for college students may be a student credit card. A student credit card is set up for young adults who have a lower income and little to no credit history.

To get approved for one, you have to provide verification of your enrollment in a college or university. Usually, the college or university has to be on an approved list by the credit card issuer. Although they can be a good starting point, some student credit cards have substantial fees and very high interest rates.

If you’re going to go this route there’s often an intro 0% APR, which stands for Annual Percentage Rate. Your APR is the interest rate you’ll pay on your credit card balance if you decide to carry it over month to month.

Make sure you find out what the APR is after the introductory term is over so you won’t be surprised later. Americans paid $104 billion in credit card interest and fees last year so it’s a good idea to know the details of your card. Especially if you’re using your first credit card to build up your credit history, it’s crucial to know the specifics so you don’t damage your credit through negligence.

What is a Secured Credit Card?

Sometimes, the first credit card you can get is a secured card which requires a deposit. The deposit you put down becomes the line of credit for the credit card.

For example, if you put down $1,000 for the deposit, the amount you can charge is up to $1000. Some credit card issuers will give you the option to add a deposit to an existing line of credit to increase the overall credit limit.

Make sure to shop and compare when you’re applying for a secured credit card. Most of these types of cards do charge a fee per year but they charge drastically different amounts. Don’t fall for any place that requires a fee simply for applying.

The amount you’ll have to deposit is based on the particular card you’re applying for but minimum deposits of $300 to $500 are standard. The credit limit might be the deposit amount or a certain percentage over it – it just depends on the card issuer.

If you’re going to try to get a secured credit card to build credit, it’s vital you double check if the company reports to all three major credit bureaus. There’s no point in going with that card if there’s no substantive proof of your payments and you can’t use the history you built to bulk up your positive credit.

In order to get a regular credit card after having a secured one, you usually need to have a full year of on-time payments. Then, the same card issuer may offer you an unsecured card if they want to keep you as a customer.

What Does it Mean to Become an Authorized Credit User

An authorized user means that you have the ability and permission to use someone’s credit card account. You’ll receive a credit card in your name that’s linked to the primary account holder’s information and money. You would be considered a secondary user to the account.

Pros of being an authorized user: The benefit of being an authorized credit user is that you don’t have ultimate financial responsibility for the account. As a secondary user, you won’t receive account statements and you’re not legally liable for paying outstanding debts.

The primary account holder, on the other hand, is in charge of paying debts and gets the account statement every month.

You’ll accrue positive credit history as an authorized user as long as the primary account holder is up-to-date on their payments.

Cons of being an authorized user: Authorized users don’t have the same ownership rights to the accounts – they can’t add other users or ask for credit limit increases, for instance. Sometimes, the secondary user is limited in the amount they can charge as specified by the primary account holder.

You can still be negatively affected as a secondary user if you’re financially piggybacking on the stronger credit of someone else. If the balance isn’t paid on time for the account, all the users are affected.

Tips for authorized users: If you want to be an authorized user on someone’s account, make sure you know their credit history. It only makes sense if the primary account holder has excellent credit that you’ll inherit to an extent as long as payments are made on time and balances aren’t carried month to month.

Benefits of your own credit card: With your own card, you have the ability to have full control and access over your account. You aren’t dependent on someone else’s financial responsibility to create a credit history. However, it’s definitely an option if you want to start somewhere and can’t get credit any other way.

What Does Annual Income Mean when Applying for a Credit Card?

When you’re applying for a credit card, issuers will look at your total gross income. They need this number to determine the appropriate credit amount to give you. If you have larger earnings, you might be given a bigger line of credit because credit card companies see you as more financially capable of paying off substantial debts.

A credit card company will look at your gross income not your net income. This is because your net income can change year to year but your gross is measurable and fluctuates less.

When you’re listing all your income on your application, make sure you add all sources of earnings. This shows other sources or accounts you could use for paying debts.

What if My Credit Card Application Gets Rejected?

If your credit card application gets rejected or you’re concerned you won’t be accepted the first time you turn in your application, don’t stress. You can build your credit through alternative methods. You’ll just have to spend some extra time looking into companies that accept different forms of credit as part of your credit history.

Do you pay utilities for a house or apartment? If your name is on the lease or on the account, you can use that as part of your credit history (dependent on the credit card company and particular card you’re applying for).

You could consider taking out a credit builder loan if you’re serious about building credit and willing to take on a loan to get there. Auto, personal and student loans can also factor into your financial history and can add to your positive credit history.

As mentioned before, you can be added on to a credit card as an authorized user. Then, use your credit card you’ll receive as an authorized user to build credit and try to apply for a credit card again after a year of on-time payments.

How are Credit Scores Weighted?

If you have some anxiety about looking into your credit score, that’s ok. Maybe you’ve found out your credit report is lacking but with patience and time, you can improve your score. All of us are awarded a variety of credit scores, calculated by different lenders looking at different categories.

Here  five main categories your lender may look at:

Payment history: Paying your balance off each month and on time is extremely important.  This is a huge aspect of your credit score – missing one payment may damage your score and can stay on your report for up to seven years.

Amounts owed: This is how much credit you’re using in relation to your credit limit (also known as credit utilization). The standard rule is to avoid using more than 30% of your total available credit.

Credit history length: This is the one aspect of your credit history that involves only patience. You can’t expect a perfect score when you’re new to the credit world, but as long as you make your payments on time, you’ll be on your way.

Credit mix: This is where less traditional forms of credit come into play. Auto loans, for example, are part of the credit mix.

New credit: This measures the amount of new accounts you’ve opened.

These are all important factors to keep in mind if you’re looking to build your credit because you can determine what aspects of your finances are more heavily weighted than others.

Getting a Credit Card is a First Step on Your Financial Journey

Although navigating all the different aspects of getting a credit card can be tricky, it takes a little bit of research and knowledge to arm yourself with the right information.

There’s numerous options for students who are looking to build their credit history or for young adults who are looking to improve their credit scores. Making loan payments on time, having a low debt-to-income ratio, and your financial history all factor into your credit score.

With the right tools and reliable borrowing practices, you can build your credit and get the right credit card for you and your lifestyle.

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