Looking for your first card? Don’t make the mistake of getting the wrong one…
As you know, there are thousands of different cards out there … but not all of them are good starter credit cards. In fact, many cards will deny outright due to your lack of credit 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 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 because you won’t be eligible for credit cards geared at students. But 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.
Option B: Are you a college student?
If so, then you can apply for college student credit cards. Several issuers have cards designed for students — and some have student versions of their regular cards. If used properly, these are great starter cards because often you don’t need a credit history in order to be approved. Right now the best one on the market is the Discover it® for Students – New! Good Grades Rewards – it has a generous 5 percent rewards program and no annual fee.However be aware that all student cards have their drawbacks; high interest rates are the norm (although avoidable if you pay on time and in full each month) and very few of them have decent reward programs (but there are a couple that do, like the one above). Due to your lack of credit history, you can expect a low credit limit as well.
In a nutshell, the cards that will be a fit for you will fall under these categories…
Cards that are secured: With secured credit cards, you will need to put up a security deposit to open an account. That amount acts as collateral for your credit limit.
Since you are basically lending credit to yourself, approval is almost guaranteed even if you have no credit history. Just makes sure the issuer is reporting to all three major credit bureaus (Experian, Equifax and TransUnion).
If you look over most of the secured credit card applications you will see that the qualifications are things like being a legal adult, having a valid mailing address and being 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 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.
Step Two: Find the best one for you
Because you are new to credit, you will need to have realistic expectations about what you can get. Here are some factors to consider…
Rewards – Generally, 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 percent 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.
Cardholder Benefits – In my opinion, the biggest advantage of using credit cards is that they come with all sorts of benefits that debit cards don’t have. For example, you might get 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 tend to have fewer 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, racking up a ton of debt and paying for it years later? Unfortunately that happens to a lot of people when they get their first credit card. So if you don’t have the discipline to handle one properly right now, 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 August 2016