If you’re new to the game, the credit card world can be rather intimidating. There are so many different cards and reward programs… figuring out which one is best for you can be like finding a needle in a haystack. Let’s talk about which cards are good for beginners… and which ones are not!
What will you possibly qualify for?
For starters, you will be limited to the easy to get credit cards on the market. That means you can forget about those 5% cash back and double mile deals out there (those require a more established history). The best credit cards for beginners will be those which are entry level or for college students (if you are one) because they will be much easier to get approved for.
The best for beginners…
…will fall under one of the following three categories. Click on the links to see my updated recommendations 2013:
- If you have no/limited credit history then what you want are credit cards for “fair” credit scores. I’m talking about entry-level unsecured cards. There are not many banks that offer them, but here are a few good ones I recommend. Their annual fees are low and reasonable. Most beginners will fall under this category. Here’s my favorite one:
- If you are currently enrolled in college then you will want to go for (duh) student credit cards! These are easy to qualify for if you are a student. If you’re not a student, you can’t apply for one. If you open one of these while you are in school, you will still be able to keep the account open after you graduate (by then the issuer will probably switch you over to a regular card). Here’s the most popular one on the market right now:
- If you are afraid you will overspend and get into trouble with your first credit card, then I highly recommend you start out using a credit card with a security deposit. Most of those only allow you to spend an amount up to your deposit amount – i.e. $300 deposit = $300 spending power. This ensures you won’t get in over your head and they are a good way to test the waters, if you think that plastic will make you feel like a kid in a candy shop (kind of like the overly-excited guy in the above stock photo).
Whatever road you end up going down, something to keep in mind in that like many things in life, credit cards in and of themselves are neither bad nor good. They’re just a tool. But what you do with that tool can be good or bad. It’s your choice.
What you do not know about carrying a balance…
It goes without saying that it would be a bad idea to carry a balance on your new card, right? But let me explain why, because most beginners don’t understand how the interest charges work…
If you pay your bill in full each month you will not be charged interest. A billing cycle is 30 days long. After that a billing statement is generated and there will be at least 21 days (known as a grace period) for you to make your payment and avoid interest charges.
If you don’t pay your bill in full you will be in for a big surprise. Why? Because if you carry any balance past the grace period, you will be charged interest on those purchases going back all the way to their date of purchases!
So let’s say you made just one purchase and that was on the first day of the billing cycle. After that cycle closes (30 days later) you only make the minimum payment during the 21 grace period. Then just 5 days after the grace period ends, you decide to pay off the full amount.
Guess what happens? You will owe a lot more than just 5 days of interest!
You will be charged interest on the amount for the 30 days in the billing cycle + the 21 days in the grace period + the 5 days after that. That’s a whopping 56 days of finance charges!
Most people starting out don’t realize this… interest starts on the day of purchase, not the payment due date. However can avoid that, if you pay in full before the statement due date.
Ultimately, you are the one responsible for using them in a good way. The best credit card for beginners starting out will be whatever type they can handle, so there’s no one-size-fits-all answer. Remember as long as you pay your bill in full and on time, the credit card company isn’t making money off interest. You will be building up credit history, preparing yourself for bigger and better opportunities later on.
Written or last updated November 6, 2013