In 2009, the U.S. Congress passed a package of laws that made it more difficult for young adults to get credit cards. The good news is that fewer people are risking crushing debt. However, as a result of those reforms, you might be somewhat confused about how to get your first credit card.
First of all, you should be sure that you’re prepared to handle the responsibility of your first credit card. Some self-reflection is in order. Do you make more than enough every month to pay all of your expenses? Do you have good impulse control, or are you likely to spend too much money buying things on a whim? Will you always remember to pay your bills on time?
Once you’re certain that you’re ready, it’s time to investigate the process.
Rules and Research
In the U.S., you need to be 18 years old to get your first credit card. However, if you’re not yet 21, you must be able to prove that you have a full-time job. If you’re 21 or older, you still might be required to demonstrate that you have a regular source of income, but it doesn’t necessarily have to be a full-time position.
One way to get a card without having a job ― which, by the way, is a bad idea in the first place ― is to get someone to cosign with you. Just be aware that when someone agrees to be your cosigner, that person is taking a big chance on you. After all, if you miss payments, it will hurt his or her credit score along with yours. Therefore, don’t be offended if people turn you down when you ask them to cosign. What’s more, don’t ever agree to be someone else’s cosigner ― even if it’s your best friend, your significant other, or one of your siblings.
When you’re figuring out how to get your first credit card, research is vital. Learn which companies specialize in giving people their first cards. Likewise, it’s vital to compare conditions and interest rates. You’ll also want to look at grace periods and fees, especially late fees (https://www.cmu.edu/finaid/financial-literacy/docs/credit-tips.pdf).
No Credit History? No Problem!
When it’s time to apply for a credit card, you might start with the banks where you have accounts. You can find applications on their websites or ask for one in person. However, if you ever overdrew one of your accounts at a particular bank, that institution might not be willing to issue you a card.
One of the main difficulties here is that credit companies review applicants’ credit histories. But when you’re trying to get your first credit card, you probably have no credit history. So how can you build up your credit report to the point where you can impress those companies?
One strategy is to get a joint card with someone who has a solid credit history. This technique is not the same as having a cosigner. Instead, you’ll be classified as an “authorized user,” which means that you’ll both have a card of your own. By paying your bills on time as an authorized user, you’ll start to build up a healthy credit report.
Another method is to get a credit card from one of your favorite retail stores. Then, whenever you shop at that store, you can use your card; other establishments won’t accept it, though. If you’re conscientious, your credit report will soon begin to improve. Just be careful not to get a retail card with an exorbitant interest rate.
Yet another option is to acquire a secured card, for which you must put up collateral in the form of a deposit that’s equivalent to your credit line. That way, if you can’t make a payment, the credit company has your money, and if you do make your payments, your deposit will be refunded. Once again, when you pay on time, you improve your credit report.
Finally, keep in mind that your credit card applications may be rejected several times. Nevertheless, keep telling yourself that you will get a card eventually. Moreover, as long as you spend sensibly and pay more than the minimum amount that’s required each month, that card will be convenient and helpful for a long time to come (http://www.federalreserve.gov/consumerinfo/fivetips_creditcard.htm).