Credit Cards for First Timers

What should you look for when you compare credit cards? Well, as a first timer, here are the most important factors to keep in mind.

Annual Fees: You will pay an annual fee for the use of your card, typically on the anniversary of your card approval. As a first time card user, look for a card with a low annual fee, or even better, with no annual fee at all. While these cards are generally basic, they help keep costs down as you get to grips with accessing credit.

Interest: Your card will have a purchase rate, which will be applied to purchases, and a cash advance rate, which will be applied to cash advances (ATM withdrawals, foreign currency and gift card purchases, gambling transactions and more). Opt for a card with a low rate on both, if possible. This should keep your interest costs as low as possible if you are unable to clear your balance at the end of the month.

Interest Free Days: Most credit cards offer a number of interest free days on purchases (usually up to 44 or 55 days). As long as you pay off your balance each month by the due date, you can take advantage of these interest free days to help you keep costs down.

Eligibility: Not all credit cards are suited to first time users. Premium cards for example, such as platinum and black cards, tend to require excellent credit history and a high minimum income. You do not want to have your application denied, as this will be recorded on your credit file and may negatively affect your credit score. Instead, look for simpler, low cost cards with more flexible eligibility requirements.

Features: Let’s be clear, features are not your first priority on a first credit card. While there are plenty of enticing features out there, they tend to come at a higher cost. If you look at rewards, for example, these encourage you to spend. Unless you have the funds to pay off that spending, you will likely carry a balance, and then pay interest that will negate the value of any rewards earned.

So, you’ve got a few credit cards on your short list. How do you narrow that list to just one card?

Low Cost: Take a look at how much you’ll pay in annual fees, and any other fees that may apply, such as foreign currency transaction fees. Pay attention to the card’s purchase rate as well, to then opt for the card with a low ongoing annual fee and interest rate.

Account Access: As you get to grips with using your credit card, it’s a good idea to keep a close eye on how you’re tracking. That means choosing a card with a good app. Instead of relying on your statement to arrive at the end of the month to see how much you’ve spent, check your account via the app every few days. Know that you don’t need to wait until the statement is due to pay off your balance, you can pay off little bits at a time or clear it completely any time you like.

Essential Features: Fancy features and rewards are out – for now. But, that’s not to say you can’t check out what features are available. Visa and Mastercard both offer a number of extras, which aren’t always advertised by the card provider. It’s worth checking your issuer’s website to find out what extras you could be eligible for as a cardholder.

Flexible Eligibility: To avoid getting your application denied, you will need to check your card’s eligibility requirements carefully. That means reading the small print. As a first timer, opt for a card with flexible eligibility requirements – and if you’re unsure, contact the card provider to ask for more info.

Knowing what to avoid is just as important as knowing what to aim for as a first time cardholder.

Premium Cards: These will typically require an excellent credit history and a high annual income. Unless you have these under your belt, premium options such as platinum and black cards are usually best avoided by first timers. Aside from the eligibility side of it, these cards also feature extensive fine print, which may be harder to understand if you’ve never used a credit card before.

Complex Features: Again with the small print. If you want to get the most out of your card, you need to know how its features work. While it’s not impossible for a first time cardholder to get their head around complex features, it will take more effort being a credit card newbie.

Rewards: Rewards cards reward spending. Until you get used to only spending what you can afford to pay back each month, rewards are usually best avoided as they encourage spending month to month.

Introductory Offers: While some intro offers can be handy to have as a first timer – for example, reduced annual fees or a 0% purchase offer – they shouldn’t be the sole reason to choose a card. If the card is solid – and the offer is too – go for it, but if the offer only serves to entice you to apply for a card that doesn’t suit your needs, it’s best to walk away.