Applying for a credit card isn’t only about paperwork. It’s also about starting your financial journey and climbing onto the ladder of adulthood. So, how do you know if you’re ready to apply for a credit card? From picking a card to applying for one, this article will focus on the many factors to consider.
Are you ready for your first credit card?
Getting a credit card can be about more than just qualifying. Budgets and planning also help when managing credit. Your first credit card may even serve as a sort of litmus test for your financial bearings. That’s why you may want to think about your readiness before applying for your first credit card.
Here are some questions to help determine if you’re prepared for your first credit card. These points may help you think about your reasons, responsibility and goals.
- Do you see a credit card as a responsibility? This may signal that you're on track to manage money in a responsible way.
- Do you stop and think before making purchases? If so, this may be a sign that you can spend within your means.
- Do you have an emergency fund? This can cushion your payments if unforeseen spending disrupts your credit card budget.
- Do you understand how credit card interest works? There are distinct types of interest, sometimes even on the same card.
Credit cards to help build credit
So, if you feel like you’re ready for your first credit card, you may want to explore what kinds of credit cards are available to help start building credit. Credit cards come in many forms including secured, student and pre-qualified versions. It may be more challenging to qualify or start building credit if you’ve never had a line of credit before, but there are still some options to choose from:
Cards that allow co-signers
A co-signer who qualifies may help you get a credit card if it’s challenging for you to qualify on your own. In this arrangement, you would be named as the account owner and would appear on the bill as the payee. But with co-signed credit cards, the debt may appear both on your credit reports and those of the co-signer. That’s because you and your co-signer are both legally responsible for the debt.
Cards with authorized users
Becoming an authorized user may be an alternative to co-signing. In this scenario, someone with a credit card can add you to their account. As an authorized user, you could still get a credit card with your name on it, but the primary cardholder typically holds legal responsibility for the debt. Note that not all credit card issuers report authorized users' activity. This means that you may not be able to build credit as an authorized user, depending on the card’s terms.
Secured credit cards
Secured credit cards may be an opportunity to establish credit and can give you practice for your first standard credit card. They also give those with less than stellar credit a chance to rebuild. Secured credit cards start with an upfront security deposit. The deposit will often help determine the card’s credit limit.
Student credit cards
Student cards often target 18 to 21-year-olds, but those younger than 21 may need to provide proof of income in the form of pay stubs or tax filings. There’s also no guarantee you’ll qualify for one as a student applicant.
What to know about interest rates and fees
No matter what type of credit card you want, you’ll have the opportunity to review the APR and fees before applying. Credit card issuers include a Schumer in the application information, which notifies applicants of the card’s APR rates and fees. Credit card fees can apply to:
- Grace periods
- Annual fees
- Balance transfers
- Cash advances
- Overdue payments
- Returned payments
What you need to open your first credit card
- CARD stands for the Credit Card Accountability Responsibility and Disclosure Act. Congress enacted this law in 2009 to safeguard credit card users, including young consumers. As a result of CARD, you may be required to show proof of a steady income.
- No matter your age, you’ll normally need to include various types of financial information on your credit card application. Issuers can use this information to consider your ability to make monthly payments.
- Credit card applications usually require forms of identification. It may be useful to have a government-issued picture ID handy. You will normally need to supply your Social Security number and a valid address as well.
Was your credit card application denied?
Your first credit card application may get denied. If you’d like to hear the reasoning behind your rejection, information is available to better understand a credit card denial.
- The Fair Reporting Act requires lenders to send you a notice, called an adverse action notice or adverse action letter. This outlines the reason behind your rejection.
- Credit Journey can help you check in on your credit. Specifically, it can help you investigate your credit report and score. This may give you a chance to find any errors and then file challenges with the credit bureaus.
Remember that applying for credit cards can trigger a hard inquiry on your credit report. So, before you jump back into application mode, you may want to take the time to understand why you were denied.
Using your credit card to build credit
If you've been approved for and have finally received your first credit card, how will you put it to good use?
You may like to keep two basic principles in mind when getting started with a credit card. First, creating a budget for your spending could help set some limits for staying within your means. Second, paying your bills on time, month by month, can help you build credit and avoid fees.
Build credit from the start
You've now explored several avenues to get your first credit card. Whether you want to learn more or are ready to apply, Credit Journey can help show you where your credit stands today.