Best Starter Credit Cards for First Time Applicants
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For most people, getting their first credit card is a milestone event – one that sets a new course for their personal finances. The frustration for many young people is they can’t get a credit card until they have established some credit; and they can’t start building their credit without a credit card.
While that is not altogether true anymore, getting a starter credit card is an important first step in building a credit history. Today, there are an increasing number of credit card issuers willing to provide some of the best first time credit cards to young adults without established credit. However, it’s important to know what you are getting when looking at some of the best starter credit cards and how to use them to quickly build your credit.
What is a Starter Credit Card?
If you have yet to establish a solid credit history, there are credit card issuers who cater to people with no or poor credit. In most cases, the cards offered have few frills and their annual percentage rates (APR) are typically on the high end – in the 20% to 30% range. With many of the best starter credit cards, you can expect to pay an annual fee of $25 to $50. Some of the issuers deal exclusively with higher credit risks may charge upwards of $75 to $100 a year in addition to an application fee. It is best to try to avoid these starter cards primarily because their fees and expenses tend to be very high.
Some of the more legitimate, larger issuers, such as Capital One offer a range of credit cards for people just starting out or who are starting over with building their credit. Depending on the particular card, you may still pay an annual fee, but they tend to be much more reasonable. Although the APR may still be on the high end, it shouldn’t matter as long as you pay your balance in full every month, which is the best practice when using a credit card for the first time.
The best place to try to obtain a starter credit card is your bank where you have your checking and savings account. You already have a relationship with your bank, which might put you in a position to earn their trust in issuing you a credit card.
Generally, the best starter credit cards don’t come with rewards programs or, if they do, they’re not very robust. However, after using the starter card for a year or more with a clean payment record, you may be able to upgrade to a better rewards card.
The key to a first time credit card is to use it only for budgeted purchases with the intent on paying the balance in full each month. There is nothing that can build your credit more quickly than continuous monthly, on time payments. To build your score even faster, it is also important to keep your credit utilization — the amount of debt versus your credit limit – to below 25%. If you are just starting out or starting over using a credit card, the best practice is to keep your credit utilization at zero.
AvantCard
- No hidden fees, no penalty APR
- Zero fraud liability for unauthorized charges
- Annual Fee: $29
- Purchase Regular APR: 26.24%
- Product Terms & Disclosures
What is a Secured Credit Card?
Another one of the best first time credit cards is a secured credit card. Secured credit cards are becoming a popular means for building a credit history that can lead to obtaining an unsecured credit card. A secured card, issued as a Visa or MasterCard, looks and acts just like an unsecured card. The primary difference is that the credit line is established not by the card issuer, but by the card user with a savings deposit. The deposit, which can range from $250 to $2,500, is immediately available as your line of credit.
When you use your card, you create a balance that must be paid, either in full each month or in monthly payments. Like a regular credit card, you will be charged interest and the APR can be as high as a secured credit card. With many issuers, if you use your card for a year with on time payments, you may be upgraded or invited to apply for an unsecured credit card. It is important to make sure the issuer does report payments to the credit reporting agencies so you can build you credit history as you use the card.
Credit Cards for Students
It used to be that, once you applied for college, you would be bombarded with student credit card offers. Or, when you attended freshman orientation, you would have to navigate your way through dozens of representatives pitching credit cards on campus. That has all changed with the enactment of the Credit Card Act of 2009, which prevents credit card issuers from soliciting students under the age of 21.
Prior to 2009, it was actually fairly easy for college students or young adults to obtain one of the best first time credit cards. Today, students under the age of 21 must meet a higher standard of financial sufficiency or have a cosigner for the card. While this may have put a crimp in the number of credit cards available to college students, there is still a good selection from which to choose.
If you are invited to apply for a student credit card by multiple banks or issuers, avoid applying to more than one because it can hurt your credit score. You should only target those college student credit cards that offer the best starter credit cards in terms of rates and features. Among some of the features to look for are no annual fees and no over-limit fees. Some student credit cards offer rewards, which can help pay for school expenses.
Using a Starter Credit Card to Build Credit
While you’re at the beginning stage of your credit history, it is an opportune time to build solid credit-use habits so you can watch your score increase over time. If you following these essential steps, you will avoid the plight of millions of Americans whose debt is spiraling out of control and build a strong foundation for your financial future.
- Create and follow a strict spending plan or budget.
- Do not purchase anything with credit that you can’t afford based on your budget.
- Pay off the entire balance each month. If you can’t do so in a particular month, make as big of a payment as you can. Never let your account balance exceed 25% of your credit limit.
- Never pay just the minimum payment; that’s how debt begins to grow out of control.
- Always pay on time. With some cards you will avoid interest charges if you pay within the grace period.
- Avoid the temptation of new credit card offers. Never apply for more credit than you need.
- Try not to move around too much. Lenders prefer stability in employment and residence.
