Credit Card Basics

How to Get Your First Credit Card

Getting your first credit card can seem pretty simple. After all, credit card companies mail tons of offers every year, including "pre-approved" applications, along with countless more email offers and online ads that seem to pop up everywhere.

Before you click on that link or mail in that application, however, it pays to do some research to make sure you're getting a card that works for you.

The question of when to get your first card is simple: you should get one when you need it and can afford to pay off the bill every month. That might seem obvious, but card offers frequently show up on college campuses where students not only lack incomes to pay off credit card bills but already may be piling up more than enough debt through student loans.

Perks with Your Plastic

A credit-card is nearly essential for renting a car or making other travel reservations, and for covering job-related trips, entertainment or other expenses. Cards also tend to offer much more consumer protection than debit cards should the card be stolen or hacked, as well as the ability to reverse charges if, for example, an online purchase never arrives. Cards also can be helpful to have on hand in an emergency, such as a car breakdown or a trip to the emergency room.

Other advantages of credit cards can include the wide variety of perks offered to users, ranging from cash-back offers that refund part of your annual spending, to frequent-flier miles that can snag you free plane flights, and some store-branded cards get you access to exclusive sale offers and previews.

Other perks can include price guarantees, insurance on card purchases that are lost or stolen, and even special offers on concert tickets. You can research card benefits at several websites, including Experian, where you can delve into specific types of card benefits.

While you're looking up perks, also look at the terms of any cards you're considering, including annual fees, interest rates, minimum payments and grace periods. The grace period — usually 25 or 30 days from the time of purchase—is the window of time when your charges are interest-free if they're paid in full at the end of the period.

In addition to online sources, you may want to look at offers from organizations you're already associated with, such as your bank or credit union, or even an educational institution. A general-purpose card from a big network, such as Visa or MasterCard, usually is your best bet for a first card.

What's Your Credit Score?

Before you start applying, stop and check your credit scores and credit history. Your history is the record of your debts and how you've paid them in the past, while credit scores are mathematical rankings that reflect various factors your history. You can get a free copy of your credit report every year from each of the three major credit bureaus — TransUnion, Equifax and Experian—by visiting or you can also get a peek at one of your credit scores. If you find missing or incorrect information, check the bureau web sites for information on correcting any errors.

Whatever is—or isn't—in your credit history gets mathematically crunched to produce your credit scores, which typically range from approximately 250 to 900, although the range varies with each different type of score. If you have a poor record of paying your debts on time the resulting low credit scores mean you'll probably have trouble getting a card or you'll have to pay higher fees and rates. With the FICO Score powered by Experian data, scores of 720 or better are considered excellent, between 690 and 720 are good, but anything below 630 will make it difficult to get a card at an affordable interest rate or annual fee.

Establishing Your Credit

If you've never or only occasionally borrowed money, chances are your thin credit history is likely to produce an unappealing set of credit scores, resulting in a kind of credit-card Catch 22: You can't get credit because you don't have a history of borrowing, but you can't build a credit history if you don't get approved to borrow.

One approach is to take out a card with a local retailer or gas station chain to establish your credit. In that case, you'll want to make just a few small purchases each month and pay the card off as soon as the bill arrives. After a few months, that responsible activity should start showing up in your credit scores.

Another alternative if you have trouble getting a card is to apply for a secured credit-card or find a co-signer.

A secured card can be opened with a bank or credit union in exchange for depositing enough cash to cover the credit limit of the card. This reduces the risk to the bank if you don't make your payments. Once your credit is established, you can apply for a regular card then close the secured card and get your money back.

A co-signer is someone with good credit who'll sign your application and will also be responsible for your debt, so most often this is a close family member. If you default on payments, your co-signer will have to pay up and their credit will be damaged along with yours, putting a serious strain on your relationship. The co-signer also can charge with the card.

Once you get your card, keep your credit in good shape by paying your bill on time—at least the minimum—and by aiming to keep any balance on the card to less than 30% of your credit limit. The amount of your available credit that you use—called your "credit utilization rate"— is a big factor in your credit scores. You can go online to have the minimum monthly payment deducted directly from your bank account to make sure you don't miss a payment, too.

Playing Your Card Right

Because a shiny new credit card can tempt users into going on a shopping spree, you might consider using your card only for one type of expense, such as gas or groceries, and paying it off each month. Another approach is to tuck the credit-card receipt in your pocket after you make any purchase, then pay that amount to the card issuer when you get home. In all cases, you most likely want to avoid taking any cash advances on the card, which charge the highest interest rates and have no grace period.

If you end up using your card in an emergency or to take advantage of an attractive sale on a big-ticket item, experts advise making a plan to pay that balance off before adding any new charges. If you find yourself financing your day-to-day expenses and lifestyle with your new plastic, that can lead to trouble. Instead, consider putting yourself on a budget or seeing a credit counselor to get ideas about setting one up before you get too deep into debt.

And, whether you get a mailed, paper statement or a digital one, you'll want to check your bill every month to make sure that unauthorized charges haven't been placed on the account and to check that your charges and payments are accurate.

The convenience and benefits of a credit card can make managing your money easier and even bring some perks your way. Getting your first card and handling it properly can be an important step in building your credit and moving on to bigger purchases, such as a car or a home.

Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
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