What to Know Before You Apply for Your First Time Credit Card

Credit cards are essentially instant mini loans that you can use to pay for stuff. Credit cards can help you build credit history and rack up rewards like cash-back bonuses, airline miles, or points.

But despite a credit card’s benefits, it’s important for first time credit cardholders to understand that a credit card isn’t a source of free money. You must pay back every purchase. And if you don’t pay off your balance in full each month, the remaining debt usually starts to accrue interest—which can quickly spiral out of control if you’re not careful.

Choosing the right credit card for a beginner might seem like a daunting task, given the wide range of available card options, each with its own features and specifications. Ultimately, the “best” credit card choice will depend on your financial situation and needs, so it’s important to look at a card’s rates, fees, and benefits to make sure that card aligns with your spending habits.

In other words, that fancy travel card with airport lounge access—and a $400 annual fee—might not be the best credit card for someone simply looking to establish credit history and earn some rewards.

According to experts, there are two features first time credit cardholders should look for:¹

• No annual fees. This means you don’t have to pay a yearly price to hold your credit card.
• Low APR. The lower the APR, the less interest you’ll accrue on each statement if you don’t pay your balance in full.

All credit cards will have a card member agreement that provides detailed terms and conditions. These agreements usually list your card’s APR, annual fee, any other associated fees, rewards and bonus criteria, restrictions, and more.²

There’s a lot to take in. Here are a few terms that every first time credit cardholder should know:³

• Credit limit: The maximum amount of credit you can charge on your card.
• Minimum payment: The lowest amount you must pay by the due date.
• Late payment: A bill payment made after the due date. Late payments may incur a fee.
• Grace period: The period between the end of a billing cycle and the date your payment is due. You usually aren’t charged interest during the grace period, as long as you pay your statement balance in full, on time, each month.
• Foreign transaction fees: A fee for making a purchase in a foreign currency. Not all cards have foreign transaction fees.
• Cash advance: Using your credit card to obtain cash, such as through an ATM. All cash withdrawn must be paid back, usually with an added fee and accrued interest based on a different APR than the card’s APR for purchases.

There are a few factors that will influence how easy—or difficult—it may be for you to become a first time credit cardholder. For example, federal law dictates you must be 21 or provide proof of independent income to get a credit card without a cosigner.⁴ Credit history also plays a role in what kind of credit card you can get. But if you don’t have credit history, don’t fret. There are plenty of credit cards directed towards people with little to no credit history.

Another option is to become an authorized user on someone else’s account.⁵ A parent or older sibling, for instance, could add you to their account, and the card company would send you a credit card with your name on it. However, authorized users aren’t legally obligated to pay the bill, so it may not have that big an impact on building your own credit history. Still, it can be a great way to get your feet wet and learn about responsible credit card use.

When you find the best first time credit card for your needs, you should be able to apply online. You might need to supply your driver’s license and social security number, phone number, and other information depending on the application.

For a first time credit cardholder, it can be important to remember that credit cards come with serious responsibility and real financial risk. With the rate that interest can accrue, debt can quickly get out hand. And, late payments can end up damaging your credit history. But if you treat your card like cash and use it responsibly, you can build up rewards and establish a good credit history, which can lead to greater financial opportunities in the future.

Here are some experts’ suggestions for using your credit card responsibly:⁶

• Avoid overspending
• Pay on time and in full
• Understand all associated fees
• Keep a low credit utilization rate (your balance as a percentage of your credit limit)
• Keep your card safe and private.