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Getting a credit card is one of those rites of passage that almost every young adult experiences in his or her life. Before even applying for a card I would recommend reading up on credit cards, understanding how they work and how to use them responsibly. After you are knowledgeable about how credit cards work and if you are 21 years of age or older (or at least 18 and have a job or a qualified cosigner), here are the five things you should look for when getting your first credit card.
- 1. Annual fee. Get a card that doesn’t have one. Unless you’re rolling in the dough, you’ll have your hands full paying off your balance before long.
- 2. Interest rate. Make sure it’s reasonable – say, under 20%. It won’t be as low as APRs for longtime cardholders, but you shouldn’t be getting gouged either.
- 3. Introductory rates. If you know you have to make some purchases in the near future (like for college or getting your own place), a card with a lower introductory interest rate might be attractive. Just be sure to pay off as much (or all) of your balance as possible before your rate goes up.
- 4. Penalties. Take the time to read the fine print and discover what triggers penalties on your account and how to avoid them. Many credit card issuers sock cardholders with huge fees for sending in payments late, exceeding credit limits, and even for not using the card.
- 5. Rewards. Credit cards with rewards programs are great – as long as you’ll redeem the points for something you need. For instance, if you won’t be traveling on planes, you don’t need to have a card that gives you double airline miles.
It’s important to keep in mind that when applying for your first card, it will most likely be a student or subprime card because of the lack of credit history. If you are a student I can recommend the Discover Student Card, which has no annal fee, and a great rewards program that is comparable to Discover’s higher end cards.