11 Things to Know Before Getting Your First Credit Card - NerdWallet (2024)

MORE LIKE THISCredit CardsCredit Card Basics

Getting your first credit card is a huge milestone — and a big adjustment. You might already have a sense of how credit cards work and how to handle a credit card responsibly, but the devil is in the details. Understanding those ins and outs before diving in will save you money and help you build good credit more quickly.

NERDWALLET'S GUIDE TO YOUR FIRST CREDIT CARD

Guide homepage11 things to know before getting your first credit cardAm I ready for my first credit card?How to qualify for your first credit card7 options for your first credit cardHow to use your first credit cardWhat is a Schumer box and how do you read it?

1. The best credit cards aren’t for beginners

As a newcomer to credit, you probably won’t be able to qualify for the absolute best credit cards — the ones with rich rewards and perks, big sign-up bonuses or long 0% interest periods. Those cream-of-the-crop products are available only to applicants with good or excellent credit (scores of 690+) and longer credit histories who meet certain income requirements.

You'll likely have to start smaller with your first credit card, with a product geared toward people with limited or no credit history. It's not all bad news, though — many such cards offer decent rewards and don't charge annual fees. Some options to consider include:

» MORE: The best credit cards all have these three things in common

2. A security deposit makes a credit card easier to get

If you’re having trouble getting approved for your first credit card — say, because you're starting out with no credit at all — try a secured credit card.

Secured credit cards are designed for people with damaged credit or no credit. To open your account, you’ll first need to put down a cash deposit. Your credit limit is typically equal to your deposit. Minimum deposit requirements range from $200 to $500, depending on the card. Most secured cards allow you to deposit more to get a higher credit line.

Falling behind on payments could mean losing this deposit. However, if you always make on-time payments and spend well below the card's limit, you could establish good credit within a matter of months. At that point, your issuer might upgrade the account to a regular unsecured card, or you might apply for an unsecured card and close the secured card in good standing. In either case, your deposit would be refunded.

🤓Nerdy Tip

Secured credit cards are different from prepaid debit cards. With prepaid debit cards, you load money onto the card and purchases are deducted from the balance. This card activity doesn’t affect your credit. With secured credit cards, you’ll have to make monthly credit card payments — that is, charges aren’t deducted from your security deposit — and card activity does affect your credit.

3. Your first credit card can build your credit — or ruin it

One of the main reasons to get your first credit card is to boost your credit. If you're not careful, though, it can have the opposite effect. It all depends on what you do.

Every month, your issuer will report your credit card activity to credit bureaus — the companies that compile the credit reports that form the basis of your credit scores. The reported information includes whether your payments have been on time and how much of your available credit you've used. Late payments are bad. Maxing out the card is bad.

To make sure your credit card activity helps as much as possible, pay in full and on time every month and stay well below your credit limit. (A good rule of thumb: Keep your balance under 30% of your available credit at all times.) You can also track your credit scores to see where you stand. You can get your free credit score on NerdWallet to monitor your progress.

4. You can see the rates and fees before applying

Credit card issuers are required by federal law to publicly disclose certain terms, such as interest rates and fees, before you apply. These are displayed in what’s called a Schumer box, a table that can usually be found on a credit card’s application page online (look for a link marked "Rates and fees," "Pricing and terms" or something similar) or on a slip enclosed in paper applications. The Schumer box includes the card's:

  • Annual fee, or what it charges cardholders on a yearly basis.

  • APR, or annual percentage rates. This is the interest rate you'll pay on balances you carry from month to month. Some cards charge different rates on different types of balances, including purchases, balance transfers (debts moved to the card from other accounts) and cash advances (cash withdrawn with the card, usually at an ATM). Some cards, though not many, also have penalty APRs, which they impose after a late payment.

  • Foreign transaction fees, or fees charged when making purchases outside the U.S. — typically, 3% of the amount charged.

  • Late fees, which are charged when you pay late by even a day or if you don't pay at least the minimum amount due.

Of course, there's some information you won’t get until after you apply. For example, in most cases you won't know what your credit card limit is until your application is approved.

» MORE: How to apply for a credit card online

5. Credit card fees are avoidable

It's possible to avoid credit card fees altogether, even if you're new to credit:

  • Plenty of excellent starter cards, including many secured cards, don’t charge annual fees.

  • Late fees aren't an issue if you pay on time.

  • Foreign transaction fees are irrelevant if you don’t plan on using the card to make charges outside the U.S. — and several issuers don't charge foreign transaction fees anyway.

  • The charges associated with balance transfers and cash advances are a moot point if you never make these types of transactions.

  • Over-limit fees, imposed when you exceed your credit limit, are all but extinct. Issuers can't charge them unless you opt into over-limit protection (when the issuer covers charges above your limit) — and even then, you can avoid them simply by staying within your limit.

6. Interest is completely avoidable, too

Speaking of avoidable expenses: Regardless of how high your credit card APR is, you don’t have to pay a dime of interest as long as you pay your credit card bill in full every month. That's because of your card’s grace period. Simply put, after you pay your bill in full, interest won't start accruing on new purchases until the next due date. Pay the next month's bill in full, and once again interest won't accrue, assuming you're only using your card for purchases. Keep it up, and you'll never have an interest charge.

However, if you don't pay your bill in full — that is, if you carry a portion of your balance over to the next month — then not only will you pay interest on that carried balance, but interest will begin accruing on new purchases immediately.

7. You can — and should! — pay more than the minimum

Credit card statements prominently display your minimum payment due, or the smallest amount you need to pay to keep your account in good standing. That can be confusing. It might read like a friendly suggestion: “You can pay the full amount, but you could also get away with paying this much smaller amount!”

In reality, paying less now generally means paying much more later. The minimum typically covers the past month's interest and fees (if any) and only a small amount of the underlying balance. So when you pay only the minimum, you aren't making much of a dent in your actual credit card debt. You're mostly treading water. If you continue to make purchases on the card, that can lead to an out-of-control balance.

8. Paying late comes at a high cost

Missing your due date can get expensive quickly. Depending how late your payment is, you could face:

  • Late fees. The legal limits on these fees are adjusted annually. But generally, the first time costs well over $20, and subsequent violations can be close to $40.

  • Penalty APRs. Most credit cards no longer charge penalty APRs, but some do. A penalty APR kicks in when you pay late, and can increase your interest rate to 30% or more right away for new transactions. And if the payment is more than 60 days late, that penalty APR can also be applied to your outstanding balance.

  • Damage to your credit. Paying a day late won’t hurt your credit. But if you pay 30 or more days late, your payment will also be recorded as late on your credit reports, hurting your credit scores.

Consider setting up automatic payments from your bank account. Or, if you’re worried about overdrawing your account, note your due dates on a calendar as a reminder.

9. Getting too close to your limit can sink your credit score

The percentage of available credit you use is called your credit utilization ratio. This is a major factor in your credit scores. When your utilization ratio creeps up too high — if, for example, you have a balance of $1,500 on a card with a $2,000 limit — your credit scores can take a beating.

The lower your credit utilization ratio is, the better. To keep your score in good shape, try to use less than 30% of your limit at all times. That way, you can be sure that whenever the issuer reports your account’s status to the credit bureaus, your balance won’t be too close to your limit.

10. Dealing with credit card fraud isn’t as difficult as it sounds

If fear of fraud has made you reluctant to pull the trigger on your first credit card, understand that credit cards actually offer you more protection against fraud than debit cards do.

If crooks gain access to your debit card information, they could empty your bank account in an instant. You can report the fraud to your bank and recover your money, but that will take time to straighten out — and in the interim, you could be strapped for cash.

When your credit card information is used fraudulently:

  • It's the credit card company's money at stake, not yours. You’ll have plenty of time to dispute any fraudulent charges and remove them from your outstanding balance, typically right away.

  • You don’t have to pay. Federal law minimizes your liability for unauthorized credit card purchases, and zero-liability policies of credit card networks like Visa and Mastercard generally bring your liability down to $0.

  • Getting a replacement card is relatively easy. After you call your issuer to alert them about fraud on your account, they’ll cancel your card and send you a new one with a new number. No one will be able to make transactions using your old card number.

11. If you’re rejected for a credit card, the issuer will tell you why

Getting rejected for a credit card is a bummer, but you can learn from it. Card issuers are required by federal law to send you an explanation for their decision, called an adverse action notice. For example, an issuer might say you were rejected because your income was too low, or you lack a credit history. This feedback could help you decide how to improve your chances for approval next time.

» MORE: See our guide to choosing your second credit card

11 Things to Know Before Getting Your First Credit Card - NerdWallet (2024)

FAQs

What is the number 1 rule of using credit cards? ›

1. Pay off your balance every month. Avoid paying interest on your credit card purchases by paying the full balance each billing cycle. Resist the temptation to spend more than you can pay for any given month, and you'll enjoy the benefits of using a credit card without interest charges.

What is the average credit score when you first get a credit card? ›

Most people's initial credit scores are between 500 and 700 points, depending on the steps taken when establishing credit. However, you won't have a credit score to report if you've never opened a credit account. Read on to learn more about your starting credit score and how to build your credit over time.

What is a good amount for your first credit card? ›

If you have good credit — a FICO score of 670 or higher — you'll likely be approved for a higher credit limit than you would with fair credit. That said, limits on these cards can still range from $500 to $1,000 for first-time cardholders, though you should be able to qualify for larger limits over time.

What is the first thing you should look at when applying for a credit card? ›

Annual Percentage Rate (APR).

This is the cost of borrowing on the card, if you don't pay the whole balance off each month. You can compare the APR for different cards which will help you to choose the cheapest. You should also compare other things about the cards, for example, fees, charges and incentives.

What is the 2 3 4 rule for credit cards? ›

2/3/4 Rule

You can be approved for up to two new credit cards every rolling two-month period. You can be approved for up to three new credit cards every rolling 12-month period. You can be approved for up to four new credit cards every rolling 24-month period.

What is the 5 24 rule credit cards? ›

What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.

What is a normal first credit card limit? ›

If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.

What credit card is the easiest to get? ›

Easiest credit cards to get approved for
  • Best for unsecured card: Capital One Platinum Credit Card.
  • Best for students: Discover it® Student Cash Back.
  • Best for no annual fee: Citi Double Cash® Card.
  • Best student dining card: Capital One SavorOne Student Cash Rewards Credit Card.

What is my credit score if I have never borrowed money? ›

If you have no (or little) previous borrowing history, and no track record on which to determine credit-worthiness, CIBIL will assign you scores of 0 or -1 respectively: CIBIL score 0 means that information about the borrower's credit history is available for only up to a period of less than 6 months in total.

What bank should I get my first credit card? ›

Our favorite secured card, the Discover it Secured, requires no credit history or credit score for approval, charges no annual fee and offers a generous introductory offer as well as solid rewards for your spending—not something many other secured cards can claim.

How much will my first credit card raise my score? ›

So, opening a new credit card was never going to boost the customer's scores. Plus, whenever a balance transfer occurs, credit scoring formulas consider the new card balance as a new risk…even though the debt amount was previously on the credit report on an older established account.

What not to do when applying for credit card? ›

If you authorize too many credit checks in a 6-month period it hurts your credit score. So, don't apply for too many credit cards or loans at once. This will also help you get accustomed to managing new debt before you take on another account.

What are two requirements needed to obtain a credit card? ›

Review the basic credit card requirements to sign up
  • Age. First, you need to be old enough to get a credit card. ...
  • Income. Credit card issuers want to know that you have your own source of income to be able to pay your bills. ...
  • Low debt. ...
  • Credit score.
Jan 22, 2024

What are the 3 C's that credit card companies look for before issuing credit? ›

For example, when it comes to actually applying for credit, the “three C's” of credit – capital, capacity, and character – are crucial. 1 Specifically: Capital is savings and assets that can be used as collateral for loans.

What is the golden rule when using a credit card? ›

The golden rule of credit cards is to pay your balance in full each month.

What is the main rule for using credit cards wisely? ›

Pay your balance every month

Credit card balances should be paid on or before the due date. Paying the balance in full has great benefits. If you wait to pay the balance or only make the minimum payment it accrues interest. If you let this continue it can potentially get out of hand and lead to debt.

What is the biggest mistake you can make when using a credit card? ›

There are several common mistakes you can make with credit cards, which can cause financial problems. Making minimum payments only and using cards for everyday purchases are two common mistakes. Avoid using a credit card just for the rewards or points. Try to avoid paying your medical bills with your credit card.

What is the rule of using a credit card? ›

Use your Credit Card wisely and regularly:

You may have bought a Credit Card for emergency purposes. However, if you don't use your credit card continuously for a certain period of time, it incur additional charges. To avoid this, use your credit card for small purchases every couple of months.

Top Articles
How to save money (and TIME) by stocking basic food items
How to get to Giethoorn- The Netherlands village with no roads! - Wandering Bird Motorhome Travel Blog 2024
English Bulldog Puppies For Sale Under 1000 In Florida
Katie Pavlich Bikini Photos
Gamevault Agent
Pieology Nutrition Calculator Mobile
Hocus Pocus Showtimes Near Harkins Theatres Yuma Palms 14
Hendersonville (Tennessee) – Travel guide at Wikivoyage
Compare the Samsung Galaxy S24 - 256GB - Cobalt Violet vs Apple iPhone 16 Pro - 128GB - Desert Titanium | AT&T
Vardis Olive Garden (Georgioupolis, Kreta) ✈️ inkl. Flug buchen
Craigslist Dog Kennels For Sale
Things To Do In Atlanta Tomorrow Night
Non Sequitur
Crossword Nexus Solver
How To Cut Eelgrass Grounded
Pac Man Deviantart
Alexander Funeral Home Gallatin Obituaries
Energy Healing Conference Utah
Geometry Review Quiz 5 Answer Key
Hobby Stores Near Me Now
Icivics The Electoral Process Answer Key
Allybearloves
Bible Gateway passage: Revelation 3 - New Living Translation
Yisd Home Access Center
Home
Shadbase Get Out Of Jail
Gina Wilson Angle Addition Postulate
Celina Powell Lil Meech Video: A Controversial Encounter Shakes Social Media - Video Reddit Trend
Walmart Pharmacy Near Me Open
Marquette Gas Prices
A Christmas Horse - Alison Senxation
Ou Football Brainiacs
Access a Shared Resource | Computing for Arts + Sciences
Vera Bradley Factory Outlet Sunbury Products
Pixel Combat Unblocked
Movies - EPIC Theatres
Cvs Sport Physicals
Mercedes W204 Belt Diagram
Mia Malkova Bio, Net Worth, Age & More - Magzica
'Conan Exiles' 3.0 Guide: How To Unlock Spells And Sorcery
Teenbeautyfitness
Where Can I Cash A Huntington National Bank Check
Topos De Bolos Engraçados
Sand Castle Parents Guide
Gregory (Five Nights at Freddy's)
Grand Valley State University Library Hours
Holzer Athena Portal
Hello – Cornerstone Chapel
Stoughton Commuter Rail Schedule
Nfsd Web Portal
Selly Medaline
Latest Posts
Article information

Author: Domingo Moore

Last Updated:

Views: 5594

Rating: 4.2 / 5 (73 voted)

Reviews: 88% of readers found this page helpful

Author information

Name: Domingo Moore

Birthday: 1997-05-20

Address: 6485 Kohler Route, Antonioton, VT 77375-0299

Phone: +3213869077934

Job: Sales Analyst

Hobby: Kayaking, Roller skating, Cabaret, Rugby, Homebrewing, Creative writing, amateur radio

Introduction: My name is Domingo Moore, I am a attractive, gorgeous, funny, jolly, spotless, nice, fantastic person who loves writing and wants to share my knowledge and understanding with you.