Looking for your first card? Don’t make the mistake of getting the wrong one…
As you know, there are literally thousands of different cards out there… but not all of them are good starter credit cards. In fact most of them you will be flat out denied for due to your lack of history. Here’s what you need to know so you can pick out the perfect one for your needs…
Step One: Understand your options
Before you apply for a credit card, pick out which category you fall under:
Option A: Are you NOT a college student?
If you aren’t a student, there will be fewer credit card offers that you’re likely to qualify for. But have no worries… whether you’re 18 or 80, it’s still possible to get a card even if you have little to no credit history.
The best starter credit cards for people with no credit history will typically be those that are entry level. Here is a good one that is marketed towards people who fit this profile:
Option B: Are you a college student?
If so, then you can apply for college student credit cards. If used properly, these are great starter cards because often times you don’t need a credit history in order to be approved. Right now the best one on the market is from Discover – it has a generous 5% rewards program and no annual fee.However you need to be aware that all student cards have their drawbacks; high interest rates are the norm and very few of them have decent reward programs (but there are a couple that do, like the one above). Fortunately, if you pay your bill in full each month, then you will get to avoid interest charges altogether.
In a nutshell, the ones that will be a fit for you will fall under these categories…
Cards that are secured: With these you will need to put up a security deposit to open an account. That amount then becomes your credit limit – you will be able to spend up to that amount.
Since you are basically lending credit to yourself, approval is almost 100% guaranteed even if you have no credit history.
If you look over most of the secured credit card applications you will see that the qualifications are things like being a legal adult, have a valid mailing address, and be a legal U.S. resident… all very simple qualifications!
Cards that are unsecured (regular credit cards): Although secured cards are easy to obtain, their drawback is that they require a security deposit and almost always charge fees. Not to mention, they don’t have the rewards and benefits that you find on unsecured cards. So that brings us to the question, is there such thing as unsecured starter credit cards?
Well to be perfectly honest, there’s no way to know whether you qualify or not until you submit your application.
However that doesn’t mean you should just go randomly submitting applications and crossing your fingers that one approves you. Why? Because each time you apply for a credit card a so-called “hard” credit inquiry is made – these stay on your credit record for 24 months. Having too many inquiries on there will negatively impact your credit score. Because of this you will want to stick with known starter credit cards. Here is one I recommend:
Step Two: Find the best one for you
Because you are new to credit, you will need to have realistic expectations in what you can get at this time. Here are some factors to consider…
Rewards – Generally as a rule of thumb, don’t expect a starter credit card to have amazing rewards. Now there are some college student cards that have nice reward programs, but for everyone else, expect 1% on your spending at best. If you go for a secured card there probably won’t be any rewards unfortunately.
Interest Rates – One thing that is practically guaranteed is getting an outrageously high APR (like this store-only card from a tire retailer, pictured right). But even the best starter credit cards will probably charge you an arm and a leg. Call me crazy for saying this but I don’t think a high APR is always a bad thing. Why? Because hopefully it will persuade you to always pay your bill in full (but unfortunately it doesn’t always work that way).
Cardholder Benefits – In my opinion what is perhaps the biggest advantage of using credit cards is that they come with all sorts of benefits that debit cards don’t have. For example, on eligible purchases American Express cards give you free extended warranties and protection against purchases that are stolen or accidentally damaged within 90 days from purchase. Many cards have free car rental collision coverage, travel benefits, and more. The bad news? Starter cards have less benefits than mid to high end cards.
All of these factors are things to take into account when choosing your credit card.
Step Three: Manage your card the right way
How many horror stories have you heard about college students getting credit cards, raking up a ton of debt, and they’re still paying for it years later? Unfortunately that happens to a lot of people when they get their first credit card. This why it’s so important to understand credit cards and if you don’t have the discipline the handle one properly right now, then you should hold off on getting one.
If you’re ready to proceed, here are some sponsored rankings of starter credit cards for people with no credit history:
This article was written or last updated November 7, 2013