Are You Ready for Your First Credit Card?

“How do I get my first ever credit card?”

“What is the best credit card to start with?’”

“Which first time credit card is the easiest to apply and get approved?”

These are, perhaps, some questions racing through your mind when you are about to get your first credit card.

You feel excited yet apprehensive at the same time. It’s almost the same rush of feeling that you got during your first school crush years back. After all, this is something that you’ve wanted for a long time. Perhaps ever since you saw one with your parents. Maybe you know a credit card as a lifestyle or a status symbol, or even wish to have one for genuine utilitarian reasons.

These are in fact some of the questions asked by young adults aged between 18 and 21 years of age, and some of their reasons for wanting a credit card. The age group given above also happens to be that of college-going kids. Interestingly, their parents ask these questions as well! After all, they too need to know whether their kids are ready for getting a first-time credit card.

There are a few things that you, as a potential first-time credit card user, should remember. Getting a credit card when you are leaving home, for a party, a foreign trip, shopping, or just because you feel like it, are not good enough reasons. Instead, here are four rules that you need to consider before applying for a credit card for the first time:

• Maintain an emergency fund to cover three months worth of necessary expenses

• Have a full-time or regular part-time job for at least 12 months

• Make a budget for 12 months and live below your means

• Use a debit card for one year without using the overdraft protection or getting a purchase declined.

Why Is an Emergency Savings Fund More Important than Building Credit?

Here’s a financial education tip for you!

Your top priority should always be to pay yourself even when you are paying for living expenses and various other bills. You need to make savings your commitment. The critical thing to remember here is that before you think of applying for a store card or a credit card, make doubly sure that you have enough saved up for in your savings accounts for your living expenses.

An emergency fund is important because in case you were to face job loss, loss of income, a medical emergency, or sustain an injury, you’ll need the emergency fund for a few months at least. During such a time, more than looking for a job, you would want to be taking care of yourself first. Having an emergency fund helps you remain independent in such cases.

Why Income Matters for Young Adults Wanting a Credit Card

You may think that credit card companies always look at a person’s income before approving the first credit card. That is not entirely true. They do not focus on income as much as you think. However, having a steady source of income is important for the sake of your own credit health. Therefore, one instance where you should not be applying for a credit card is when you have sporadic or seasonal income. 

For instance, while at college you may work only during vacations. If you can’t pay the balance of a purchase made by credit card on time, the merchant will require a minimum monthly payment plan from you. This usually is 3% of your total outstanding balance. 

You will have to pay this regardless of whether you have a job or not, and interest will be charged if you miss payments. The most unfortunate thing is that records of such instances soil your credit report for several years. These are not to be taken lightly, as they lower your credit score and decrease your chances of getting affordable loans.

Your First Time Credit Card: The 5 Best Sources

Now that you are determined to get your first-time credit card, you need to find the best way for it. Here are some of them.

• Your bank: If you already have a savings or checking account at a bank, apply for a credit card there first. There are high chances that your application will be accepted as you are already their customer.

• Secured credit cards: Secured credit cards are those that have a security deposit against the credit limit. This makes it less risky for the lender.

• Credits cards sans credit history: These are not so easy to find. However, it can safely be said that most of the well-known credit card providers give customers limited-history credit cards.

• Retail and store cards: These are easier to get, but come with high-interest rates. Additionally, you can only use these for making purchases with a specific brand. 

• Cosigners: To get a credit card, most banks now require a co-applicant's signature. This can be your parents or guardians. You can get a card this way easily, but know that usage of the card will affect their credit history as well.

To Conclude

Getting your first time credit card is no mean feat. If you just got your credit card, congratulations. Just remember that you still have to use it responsibly for as long as you choose to have it.

Check your credit score regularly to keep track of your credit health as well.