A Guide to Opening Your First Credit Card
As a young adult you might be wondering how to apply for and get a credit card. For some of us, "credit" was rarely discussed at home or taught in school and seemed like a complex aspect of adulthood.
Navigating the world of credit can be daunting, but fear not! Listerhill Credit Union is here to teach you how to get your first credit card and build a strong credit score.
Let us demystify credit cards for you, discuss their benefits and risks, and provide practical tips for choosing the right one.
Click below to explore the essential topics covered in our comprehensive guide:
How to Choose a Credit Card for the First Time
What came first: the chicken or the egg? This same rhetorical question can easily apply to building a credit score. Many credit providers will only give credit to those with a decent score, but to get a decent credit score you have to obtain and use your available credit responsibly.
So what came first—a good credit score or a credit card? The answer is that they both need to happen at the same time.
You’ll need to build your credit history from the ground up. Consider a card with a lower limit and higher approval rate, such as the Listerhill Platinum Card. Listerhill has some fantastic credit cards that may be accessible to you, depending on the score you have built.
But don’t apply to just any card that’ll accept you. Keep up your standards! Look for these features when making your choice:
No annual fees—You shouldn’t have to pay money to use your card, especially if it’s your first one. Later, once you’ve established good credit, you can apply for a high-perk card with an annual fee.
A lower interest rate—You likely won’t be offered a lower interest rate if you’re just starting out. However, that doesn’t mean you need to accept a higher one. Shop around for a card with a reasonable rate. Also, keep in mind that if you pay off your balance every month, you won’t be charged any interest at all—therefore a higher rate won’t affect you.
Incentives for good behavior—Why not earn brownie points for playing by the rules? Look for an incentive card, like our Signature Rewards Card, which offers 2% cash back on every purchase.
Things to Know Before Applying
Before applying for a credit card, it's essential to equip yourself with the right knowledge. Here are key considerations to make your journey a smooth one.
Why Do You Need a Card?
Before you start browsing for a card, determine why you need one. It could be for general spending, earning rewards, or consolidating debt. Understanding the purpose will help you in selecting the right card.
Evaluate Your Spending Habits
Consider how you plan to use your card. If you can pay off the balance each month, look for cards that offer rewards. On the other hand, if you’re going to carry a balance, look for cards with lower interest rates. Keep in mind that balance transfer fees may apply if you want to use a card to consolidate debt.
Understand Where Your Money Goes
Some cards offer bonus points and rewards for spending in specific categories, such as gas or groceries. Knowing where you frequently spend money can help you choose a card with rewards that align with your spending habits.
How to Qualify for Your First Card
Navigating the qualification process can take time and effort. Here’s a roadmap to help you secure your first card.
Build Your Credit History
To qualify for a card, you need a credit history. But how do you build one without a card? Start by applying for cards with lower limits that accept applicants with little or no credit history, like the Listerhill Platinum Card.
Be Selective
Be choosy when applying for a card. Look for features like:
No annual fees: Initially, focus on cards without annual fees to build your credit score.
Reasonable interest rates: Consider a card with a reasonable interest rate—there’s no need to pay higher rates.
Incentives for good behavior: Look for cards offering incentives for responsible use.
Credit Qualifications
Check if the card issuers have any specific credit score requirements. As a new applicant, opt for lenient or accommodating cards for individuals with limited credit history.
How to Apply for Your First Credit Card
Once you've chosen a card that aligns with your needs, gather your documentation such as proof of income and identification. Complete the application process either online or in person. Be sure to provide accurate information and carefully review the terms and conditions before submitting your application.
If you're initially denied, focus on building your credit by making timely payments and improving your credit score. With patience and responsible financial habits, you'll increase your chances of getting approved.
What to Do If Your Application Is Denied
Don't panic if your application gets rejected! Focus on building your credit by paying bills such as utilities or student loans on time. This can improve your credit score, making it easier to qualify for a card in the future.
Alternatively, consider applying for a secured credit card. You’ll need to put down a refundable security deposit, which serves as your credit limit. These cards can help individuals with limited or no credit history build credit responsibly.
Keep in mind that when you apply for multiple cards over a short period of time, lenders can perceive it as "shopping for credit.” Each credit application counts as a “hard inquiry” on your credit report and may temporarily negatively impact your score.
Multiple hard inquiries within a short time frame can signal to credit card issuers that you may be a higher-risk borrower. Your credit score could temporarily drop and affect your chances of being approved for credit in the near future.
How to Choose the Right Credit Card
There’s never been a better time to be in the market for a credit card. New offerings provide borrowers with everything from lucrative rewards to lower interest rates!
It’s essential to take a step-by-step approach to determine how to choose an unsecured card for your needs:
Step 1: Why do you want the card?
Before looking at available options, consider what you hope to gain. You can use it for general spending, to earn rewards, or to consolidate other debts into one. Once you know what you want to use it for, it’s time to dive deeper into your spending habits.
Step 2: Consider your spending habits
Paying off a balance in full each month is the best scenario, but that’s not always what happens. If you plan to carry a balance, your top priority should be finding a card with a lower interest rate. If you plan to pay off the balance each month, then you should look for a card that will allow you to earn rewards and cash back.
Step 3: Determine where you spend money
Some cards offer bonus points and rewards when you spend more in specific categories. A few allow you to choose different types from specific areas each month. Your goal is to align the card rewards programs with what you spend money on the most.
For example, some offer more significant rewards when you use them to purchase gas or groceries while others give discounts when you buy airline tickets. So determine in which categories you spend the most money and find a card that will reward you for those types of purchases.
Step 4: Analyze the card’s features and terms
Before moving further, it’s essential to consider all of a card’s features, not just the rewards offered. The more you know about a card, the better. Here are some common features and how they may impact your decision:
Annual Percentage Rate (APR)
The APR is the amount of interest you’ll pay to use the card. The lowest possible APR means you’ll spend less on borrowing. The APR you’ll be offered depends on your credit history and score. The better your history is and the higher your score, the lower your APR will be.
Annual fees
Some cards charge a set amount of money each year as an annual fee. Yearly fees are more common for those with lower credit scores or a lack of credit history.
Other fees
Look for other charges, such as application or missed payment fees. Late fees are standard, but the amount will vary from one card to the next.
Credit qualifications
Sometimes credit card companies will tell you what credit score they seek in an applicant. Third-party sites can also give you some insight here, so it might be worth determining in advance if you even have the credit to qualify for the card.
Grace period
The grace period is the time you have to pay off the balance you’ve charged before interest applies. Some cards offer a more extended grace period than others.
Bonuses
Some lenders offer sign-up bonuses where you earn rewards, discounts, or savings for spending a certain amount.
Step 5: Which type of credit card fits you best?
There are a few other things to consider when researching how to choose the best credit card that fits your needs. Here are a few common options and what they can offer:
Rewards credit cards
You can earn points, cash back, or other incentives with every purchase. Explore the benefits and find the perfect one for your lifestyle.
Balance transfer credit cards
This type of card is ideal if you want to move all your balances into one place. Some offer a zero percent introductory offer. There’s no applicable interest if you pay off the balance in the set amount of time (usually 12 to 18 months).
Student credit cards
If you have no credit history, student cards can provide a good starting point. They can help you build a strong credit score if you make payments consistently over time.
Credit union credit cards
Don’t just shop for the big names like Visa, Mastercard, and American Express. Some of the best credit card offers are those available through Listerhill Credit Union. We offer our members several attractive options, including those with rewards.
How to Use Your New Card Responsibly
Once you’ve gotten approved, make sure you use the card to build and maintain an excellent credit score. Follow these guidelines to keep a high score:
Do:
Pay your bills on time each month.
Check your credit score regularly.
Review your statements for suspicious activity.
Keep your cards in a safe place.
Accept offers of a higher line of credit.
Don’t:
Pay just the minimum balance due each billing cycle.
Open new cards just before taking out a large loan, like a mortgage or auto loan.
Use all of your available credit.
Allow unsecured websites to save your card information.
Share your card information with anyone.
Interested in the Cards We Offer?
Ready to take the first step towards obtaining your very own credit card? The application process is easy and you can do it online from the comfort of your home or in one of our branches.
Explore our wide range of credit card options and benefits below to find the perfect fit for your needs.
