What to Look for When Getting Your First Credit Card
The first time someone ever tried to sell me a credit card, I was a sophomore in college. I was walking through an airport when a guy about my age called me over to a booth where he was taking credit card applications for an airline rewards card. He asked me if I wanted to earn a free flight and said that I should apply right then and there. When I told him I didn’t have a job, he said “Well someone bought you that plane ticket!”
I laughed in his face as I imagined calling my mother to ask her if she’d pay a credit card bill for me. Needless to say his efforts were unsuccessful.
Thankfully, with the credit card reforms that were passed in 2009, current college students are no longer targeted as aggressively by credit card companies on college campuses. But that doesn’t mean that financial institutions have stopped trying.
If you’re a student or have just recently graduated, it’s important to know what to look for in your first credit card as banks begin to flood your mailbox with “pre-approved” offers.Click to tweet
Instead of signing up for any random card just to score a free pizza like a friend of mine did back in the day (true story btw), you should understand the that credit is king, so you want to make sure you do this right!
Seek out cards with the following features:
ZERO annual fees
- Just say no to annual fees. There are many, many great cards offering rewards that don’t come with the burden of an annual fee, so take advantage of them.
Rewards (relevant to your life, like traveling)
- When you’re considering your options, pay attention to how the rewards programs work and any relevant restrictions. Some only offer rewards for certain kinds of purchases while others offer unlimited cash-back on purchases of any kind. So if you know you hate flying, or you don’t drive, don’t sign up for a travel card or one with 3% cash back on gas purchases. Choose rewards that will actually be of use to you, and be deliberate in your purchases, For example, if I know I get 2% cash back on groceries, then I definitely wouldn’t pay for my Trader Joe’s haul with cash.
Low interest rates
- Interest rates may not be as low as you’d like starting out, but finding a card with delayed interest accrual is not difficult. We’ve all seen the offers of ‘0% APR for 12 months’, etc. And once you use the card responsibly, resulting in a positive history with the company, it’s very likely that a request for a lower percentage will be granted.
While it’s important is to choose a card that’s right for you, remember that these cards are all about balance and establishing a solid credit history. You don’t want to max out your cards every month but you do want to establish some healthy credit habits. Remember that paying less than the minimum leads to that nasty little thing called compound interest (interest on interest) and compound interest only works in your favor when you invest.
1) use no more than 30% of your total credit limit each month
2) never miss a payment, even if you have to make a minimum payment.
3) Credit history, the amount of time you have had a credit line is important, so don’t close credit lines that you have had for a long time.
I used to think credit cards were dangerous, or just a way to get those new boots that were of course on sale, but seriously building a strong credit history is actually super important. Your credit history is something you will have for a lifetime and it will impact the price you pay for a car, mortgage, and other big-ticket items.