How to pick a credit card if you are new to credit
Learning to use a credit card wisely may be a crucial step in achieving financial stability. If you're just starting out managing your own money and are brand new to using credit, there are credit card options designed specifically for you.
In this article, we'll share how you can use your first credit card to help build a credit history, and we'll also share several features to consider when choosing your first card.
Good first credit card for people who are new to credit
If you're new to using credit altogether, there are credit cards called starter cards, that are designed specifically for those just starting out and applying for their first credit card. You could think of them as a credit card for beginners.
Chase offers one called the Freedom Rise℠ credit card. If approved for this card, you could earn 1.5% cash back on every purchase. In addition, cardmembers can receive discounts from select Chase partners on introductory memberships to various ride share and food delivery services.
Though it's no guarantee, if you decide to open a Chase checking account and deposit at least $250 within three days of opening the account, it may increase your chances of being approved for the card.
Starter cards may be a great way to kick-off your journey with credit. When used responsibly over time, you'll create a credit history. Having a solid credit history may help you get approved for other credit cards with higher credit limits and additional rewards.
Cards with authorized users
If you're new to credit, you may want to consider easing into it by becoming an authorized user of a friend, spouse, parent or guardian's credit card account. An authorized user is permitted to use another person's credit card as long as the cardmember signs off on it.
The authorized user gets a card in their name that's linked to the original cardmember's account. You don't need any credit to become an authorized user, but you may be able to start to build a positive credit history when payments are being made. Keep in mind, not all credit card issuers report all authorized user activity, which may not help build credit in this case.
For authorized users, special terms and conditions apply — check with the credit card issuer.
How to build credit with your first credit card
When you begin using your new credit card, you'll want to demonstrate responsible credit management over time. Eventually, you'll establish a credit history. It's a gradual process but could impact your ability to qualify for loans or secure favorable interest rates. Here are a few ways you can take action to try to build credit:
- Make on-time payments: Your payment history is a significant factor in your credit score. Always pay at least the minimum amount due by the due date. It's helpful to set up auto payments or text alerts to remind you when your bill is due.
- Pay in full each month: While paying the minimum is crucial, paying your full balance each month is even better. Not only can it help you avoid interest charges, but you can also demonstrate to lenders your ability to manage credit wisely. If you can't pay off the balance in full, even paying more than the minimum can show your willingness to pay off the debt efficiently.
- Keep a low credit utilization: Your credit utilization ratio, which is the percentage of your available credit you're using, plays a vital role in your credit score. Aim to keep this ratio below 30%.
- Monitor your credit: Regularly checking your credit reports (there will be three — one from each of the major credit unions) can help identify any inaccuracies and monitor any changes to your credit score. You can access free reports once a year from each bureau, or you can enroll in Chase Credit Journey®, a free online tool for anyone — not only Chase cardmembers — to see their credit score, credit balances, credit limits and credit history. This tool provides important insights into credit and offers an array of services for you to keep track of your credit.
Things to look for when choosing your first credit card
When deciding what credit cards to apply for, there are some features you should consider:
- Low intro APR: ;A student or starter credit card may have higher interest rates than regular credit cards but you may benefit from a low APR introductory offer. During this low APR introductory period, interest is not applied on purchases made until your regular interest periods begins. Be sure to read your cardmember agreement and monthly statements so you can keep track of when your low-interest period ends as you'll start paying interest on your credit card balance once this promotion ends.
- Low fees: ;Look for cards that have low annual fees. This is generally true of most starter credit cards.
- Reward programs: ;Students may enjoy reward program perks that allow them to earn cash back or reward points from purchases. For example, you may earn between 1%-5% cash back by making purchases at select grocery stores, gas stations and retailers. Some credit cards allow you to earn rewards points that you can then redeem for gift cards, flights or hotel stays.
The bottom line
Selecting the right credit card when you are new to using credit is an important decision and may help you get your personal finances set-up for success. By understanding the options available, considering your specific needs and knowing how to use credit wisely, you can work toward establishing a healthy credit profile.