Photo: _Dinkel_ via flickr
If you’re over 21 and gainfully employed, it’s time to start building a good line of credit by applying for your first credit card.Why? A good credit score is necessary to secure reasonable home and automobile loans, and the best way to boost yours is to use your card, not cash, to make transactions while remembering to pay off your balance in full every month.
Picking out your first card can seem overwhelming at first due to the sheer number of choices. But as long as you know what to look for, picking out the best credit card for you will be quick and easy.
Here’s what you should be looking for with your first credit card:
- Low Interest Rates A credit card’s interest rate – or APR – represents the interest rate you’ll be charged if you carry a balance over from the previous month. If you pay off your balance in full every month, your credit card’s interest rate won’t matter, but it’s always better to try and keep it as low as possible just to be safe. Most card issuers will advertise their interest rate in the form of a range of values, such as 11%-20%. Since you’re a first-time cardholder, you’ll typically find yourself on the upper end of this spectrum, and you should compare interest rates accordingly.
- No Annual Fee You shouldn’t have to pay a membership fee just to keep a piece of plastic in your wallet, especially considering that your still-undetermined credit rating doesn’t qualify you for any particularly good bonuses and rewards. Beware, though, because many credit cards that claim to have no annual fees actually do – they just don’t kick in until after the first year. As a result, you should always scan the fine print of a credit card offer before signing up.
- Rewards Program It used to be that credit card rewards like cash back and redeemable bonus points were reserved only for those consumers who qualified for high-limit cards. These days, rewards systems are the norm for most credit cards, so there’s no reason to sit on the bench just because you haven’t had a card to your name yet. Student credit cards with decent rewards are out there. For instance, the Discover More Student Card offers roughly the same rotating rewards on necessities like gas and groceries as does its bigger brother.
- Reasonable Limits Although you can’t expect the spending limit on your first card to be through the roof, it should still be high enough to remain practical. If you’re financially independent and you support yourself, you’re probably going to want to be able to spend more than $500 a month on the card in order to cover all of your expenses.
Comparing different credit cards should be easy as long as you stick to these guidelines. Although your choices will be limited to student cards and other pieces of plastic that only require fair to average credit, you can still get a good deal on your first credit card (one with with low interest and decent rewards) and start building your credit rating in no time.