Q: For first time users, what is the best card?
A: So, you’re considering applying for your first credit card? That’s great, because that is one of the most important steps of establishing and building a solid credit history and score. There are a lot of great credit card deals out there for first-time users, but there are also quite a few shady companies that often give credit newbies an expensive and unproductive credit relationship. For your first credit card, here is what you should consider:
Rule #1. An annual fee that’s not a ripoff (hopefully no fee, if possible)
Just because you’re new to the credit world doesn’t mean you should have to pay an excessive cover charge – there’s no need to get fleeced!
A lot of cards out there for first-timers will rip you off with outrageously high annual fees, upwards of $75 or more per year!
Now a high fee like that is understandable for a premium travel card like the $95 Delta SkyMiles. But you won’t even qualify for something like that anyway, so why should you be paying a fee that high?! For a regular credit card to start out with, you really shouldn’t pay much – no more than $40/year. Less is even better. Sometimes there are even offers available that charge no annual fee.
Rule #2. Stay away from store cards (usually)
Many first timers apply for store cards because they’re so easy to get, but these won’t benefit you much.
First of all, unless they are associated with Visa/MasterCard, then you will only be able to use them at the store that issues the card. You would be better off going with a general use credit card that is accepted everywhere instead – therefore the best credit card for first time users will be one associated with Visa or MasterCard (Discover and AmEx are harder to qualify for, otherwise I would recommend those too).
That being said, I do think it’s okay to get one store card as part of your plan to build up your credit since they are technically revolving credit cards that report to the credit bureaus. But just don’t rely solely on store cards… you need to have major credit cards to build a respectable credit record!
Rule #3. Pay attention to the fine print
Fortunately the Credit CARD Act (reform laws) went into a effect a few years ago, creditors have fewer ways to gouge unsuspecting consumers. But make no mistake about it, banks can still stick it to you if you’re not careful!
Buried in the fine print you will often often find the rules and policies relating to the reward programs (if the card has one). Then in the not-so-fine print (the Schumer box on the application) you will find the info about the credit terms and conditions of the card – i.e. the APRs, late fees, etc.
If you’re applying for a store card to finance a big purchase, the biggest thing you need to be wary of is “no interest if paid-in-full” financing. With these types of promotions the only way you avoid interest is if you pay the full amount back before the introductory period ends. If you don’t, the finance charges are applied to your purchase retroactively going back to day one. You will find this often misunderstood and potentially expensive zero percent, same as cash structure on store-branded cards, not Visa/MasterCards from a major bank (those truly do give 0% offers for the specified amount of time). This is another reason to avoid carrying balances on store cards (not to mention the outrageous interest rates they charge compared to regular credit cards).
After getting your first credit card follow this important tip…
It’s best to make a habit of only charging what you can afford to pay in full each month. As a first time user, the last thing you want to do is pile up a balance from the start. Not to mention, your APR will probably be fairly high as a first timer anyway, so it would not be smart to pay in full!
This post was written or last updated May 20, 2015