I remember my first credit card. I had just started my co-op internship at the university, and I wanted to build my credit. My first card was designed for students and had a limit of $ 500. As soon as I received it by mail, I hurried to buy a pair of boots in the water. It was on the East Coast in January, and waterproof boots were essential. See backsideoftheorb.com for a write-up
I paid off the entire purchase and all subsequent purchases made with my card – which is a good thing since my card had a very high interest rate. I did not notice the interest rate, nor did the other details when I joined this credit card. This lack of research was a mistake on my part.
Applying for a first credit card is an important step. Your first card is often the first tool you will use to build your credit, and the way you use it will set the tone for your future credit habits.
Choosing the right credit card is important and several factors must be taken into consideration. Here are the four most important factors to evaluate when applying for your first credit card.
As mentioned above, the interest rate on my first student credit card was very high. I did not consider this rate when I chose, but I should have. As a student, my expenses often exceeded my income. This imbalance meant that, even if I made the minimum payment every month, I often kept a balance for a period of several months, until I started my next job and could pay my balance in full.
If this represents your first credit card and you expect to have an unpaid balance for several months, the interest rate is the most important factor to consider when making your choice. Only a few months with an unpaid balance can cost you hundreds of dollars in interest. It is therefore logical to choose the card with the lowest rate.
By the way, if you must have an outstanding balance on your credit card, make sure you pay at least the minimum amount each month. Failure to pay the minimum amount will result in a reduction in your credit rating and, in most cases, increase your interest rate.
Some credit cards require the payment of annual fees, usually between $ 99 and $ 150. Often, these are reward point cards (which we will see in the next section) whose premiums compensate for annual fees. To determine if the rewards are worth paying an annual fee, you will need to decide how your card will be used. Will you use the card for your daily expenses? If so, how much do you plan to spend on a monthly basis?
If you only use your card in an emergency or to shop online (travel and other), a no annual fee credit card may be more beneficial to you.
Reward credit cards and discount credit cards are two popular ways to earn rewards through purchases. Rewards credit cards allow you to accumulate a certain number of points per dollar spent and often offer their rewards in multi-level categories. You can redeem these points for travel rewards, such as flights, hotel reservations, and car rentals.
Discount credit cards are based on the same principle, except that rewards are paid as a percentage of your purchases, usually between 1% and 4%. Certain types of expense categories earn more discounts, and rewards are paid to the owner on a quarterly or yearly basis.
If you plan on using your first credit card for your everyday expenses, a rewards credit card is a great way to maximize the efficiency of your spending. But remember that interest in unpaid balances on your credit card will cancel the value of accumulated rewards; it is imperative not to make purchases that you can not pay immediately.
Level of income required
Finally, in the case of a first credit card, the factor that will limit your choice will probably be your income, as was the case when joining my first card. As a student with only one full-time job for four months during the year, my low income limited me to student-only credit cards.
Most credit cards with strong reward programs and high annual fees require an equally high annual income. When conducting your research, focus on credit cards that are compatible with your income. To confirm your income, most lenders will require two recent pay stubs and probably also a letter from your employer.
The Best First Credit Card: Melon Discount Credit Card
If you are looking for a credit card that offers rewards, no annual fees, a reasonable interest rate and no minimum income requirements, the Melon Rebate Credit Card is an excellent choice. This credit card allows you to get 2% discounts in two expense categories of your choice and 0.5% on all other purchases. Your discounts are deposited in your account monthly; allowing you to enjoy your rewards on a regular basis. There is no limit on the amount of discounts you can get, and additional card holders are free.