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When Should You Apply For Your First Credit Card?

Getting your first credit card is a big deal and a huge responsibility. Although there are many benefits, taking on a credit card without fully understanding the risks can quickly lead to financial problems. In this article, we’ll discuss when you should apply for your first credit card, how to choose the best one, and the steps for avoiding credit mistakes.

What’s The Minimum Age to Get a Credit Card?

If you want to take out a credit card in your name, you’ll need to be at least 18. But, this doesn’t mean that the process will be simple. Thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009, it’s now more difficult to get approved for an unsecured credit card before you turn 21.

To qualify for an unsecured card at 18, you’ll need to have an established credit history and a stable source of income. Since most young adults may lack one or both, the other option is to add a cosigner with a good credit score to the application to increase your chances of approval.

Being eligible for a credit card, however, doesn’t mean you’re ready to have one.

3 Signs You’re Ready For a Credit Card

Taking out a credit card before you’re ready can potentially lead to crippling debt and a poor credit score, which can be difficult to overcome. There are, however, three signs that opening a credit card could be right for you.

  1. Steady Income. Your paycheck should cover all your living expenses, plus some additional money for savings. Working with the same employer for six months or longer is also a good sign that you’re a reliable person.
  2. You Can Stick to a Budget. Before applying for a credit card, you should create a monthly budget and see if you’re able to stick to it for a few months. If you find that you can put aside ample money after paying your bills, you may be ready for a credit card.
  3. You Pay Your Bills on Time. Paying your credit card bill on time is a must. Failure to do so can lead to late fees and interest, which can add up quickly. If you already have trouble making other payments on time, do not apply for additional credit until you can better manage your money.

Another thing to consider is why you want a credit card. Taking one out to help build your credit or to have one in case of an emergency is a smart decision. Unfortunately, many people treat their credit cards like free money. If you tend to make impulse purchases, you may want to reconsider applying for a card. It doesn’t take very long for shopping sprees and restaurant tabs to add up.  

How to Select the Best Credit Card

Once you’ve decided that having a credit card is in your best interest, it’s time to find the best card for your needs. Most credit cards with lower interest rates are only available to those with established credit histories and very good credit scores. For those who are under 21 or do not have a credit history, options are generally limited to the following if you don’t have a cosigner:

Secured Credit Cards

A secured credit card requires you to put a deposit down that is equal to your available credit line. This deposit acts as collateral should you default on your payments. Although a secured card will help you build your credit, they often have lower credit lines and more fees than unsecured credit cards. This often includes activation or setup fees, maintenance fees, as well as an annual fee. Annual percentage rates (APRs) also tend to be 20% or higher.

On the upside, you don’t need a cosigner or a good credit score to be approved. It’s also possible that the card issuer may convert your account to an unsecured card after several months or years of on-time payments. If that happens, your deposit will be returned.

Student Credit Card

If you’re in college and have no credit history, a student credit card may be a good option. These are typically unsecured credit cards with lower credit limits that are easier to obtain. Most do not have an annual fee and some even come with credit card perks, such as cash-back rewards and free Uber One memberships.

Other Options

For those who are unable to obtain either a student credit card or a secured card on their own, there are other options. If you have a relative or close friend with a good credit rating, you can ask them to cosign on a credit card application with you. It’s best to make them the main applicant, however, since their credit score will carry more weight.

Another option is to become an authorized user on an established credit card account. The primary cardholder is ultimately responsible for the bill, but you’ll get a card of your own to use. If the card issuer reports authorized user activity to the credit bureaus, it will also help build your credit history. Just be sure that the primary cardholder continues to pay on time or it could negatively impact your score, as well.

Understanding the Schumer Box

Before applying to any credit card, be sure you understand how to read a Schumer Box. Named after Senator Chuck Schumer, a Schumer Box is a disclosure of a credit card’s terms in a standardized format. This is typically a box or table that includes the following information:

  • Annual percentage rate (APR)
  • How interest owed is calculated
  • The number of days in a billing cycle (typically 30)
  • Annual fee (if applicable)
  • Penalty fees and penalty APR (applied when payments are missed or lower than the minimum required)
  • A list of transaction fees (cash advances or balance transfers, for example)

Compare information for each card’s Schumer’s Box before deciding which is the best fit for you.

Steps to Keeping a Good Credit Score

Once you’ve been approved for your first credit card, it’s important to act responsibly. Earning and maintaining a good credit score takes work, but it’s worth the effort. A good credit score can not only help you buy a car or home, but can also open other doors, such as better employment opportunities. Follow these steps to ensure you stay on the right path.

  • Use your card for a small reoccurring charge to help build your credit history. To establish a good credit history, you need to use your card. The easiest way to do this is to use your card to automatically pay a monthly service or subscription fee. It can be something as small as your monthly Netflix subscription or gym membership fee.
  • Always pay on time! To avoid late payment fees and damage to your credit score, set up automatic payments from your bank account. This way, you won’t have to worry about accidentally forgetting to pay your credit card bill. You can also set up free email or text alerts to remind you to pay your bill before the deadline.
  • Keep credit card debt to a minimum. One factor in determining your credit score isyour total credit utilization ratio. This is the sum of your credit balance divided by your credit limit. For example, if you have a credit card limit of $1500 and a balance of $1,000, your ratio is 67%, which is well over the recommended 30% or lower. The best way to keep your ratio low is to limit your spending and try to pay off your balance each month.
  • Don’t close your credit card account. The average age of your credit account is a factor in calculating your credit score. As your score improves, you may be tempted to close an older account with a higher APR or lower limit. Don’t do it, as it could harm your credit score. Instead, reach out to the issuer and see if they’ll increase your credit line or lower your rate. Don’t forget to use the card a few times a year, as well. Some issuers will close an account for non-use without any warning. This too can harm your credit score.

How to Get a Free Credit Report

Don’t forget to check your credit report regularly so you can monitor your progress and verify the information provided is accurate. You can request a free annual report from Equifax, Experian, and TransUnion by doing the following:

For affordable monthly credit monitoring and coaching, be sure to check out CreditSolver.org. Their credit coaches can help you choose the right secured credit card for you and also help with other credit issues.