If you’ve never applied for a credit card before, understanding what is needed to obtain one can be confusing.
Let’s look at how to get your first credit card, as well as different plans and tips you can use to make the process go as smoothly as possible.
7 things to know before applying for your first credit card
Before you apply for your first credit card, there are some clear steps you can take, such as:
1. Check your credit report and credit score.
Before applying for a credit card, it’s a good idea to develop an understanding of the current state of your creditworthiness by checking your credit report and credit score. Credit scores are determined by the information in your credit reports. You can receive a free credit report every 12 months from each of the three major consumer reporting companies. A nonprofit credit counselor may provide you with a credit report and score for free and go over the details with you. Credit reporting companies can also provide you with a credit score although it may come with a cost.
2. Consider a secured credit card as an option.
If you don’t have credit history or you have a poor credit score, you may have a better chance of being approved for a secured credit card. The tradeoff is that you will have to put down a security deposit when you apply for the card. The deposit amount will typically be the credit limit on the card if approved and is usually refundable.
3. Choose a card with low fees.
For your credit card, it’s a good idea to aim for one with fewer and lower fees. You may want to avoid a card with annual fees, for example. Saving money on fees could help you pay your credit card balance on time each month, which contributes towards building credit successfully.
4. Compare secured and unsecured cards.
Before you apply for your credit card, take a second to consider whether a secured or unsecured credit card is a better option for you. Not only could your choice make a difference in whether or not you are approved for the card, it may also affect your credit limit and the fees and interest rates that apply to the card. For example, a secured credit card may be easier to obtain, but there’s a possibility it could have a lower credit limit, depending on the security deposit, and higher fees or interest rates than an unsecured card.
5. Consider a card that earns rewards based on your needs.
Although not all credit cards offer rewards, if you’re interested in applying for one, you should consider a card that gives you rewards for types of purchases you frequently make or shopping at certain vendors that you regularly visit. For example, if you enjoy dining out, try to find a card that offers rewards for purchases at restaurants.
6. Limit the number of applications.
Although you can apply for many credit cards, your credit score may take a small hit with each application you file. While this decrease isn’t typically significant for each credit card application, applying for many credit cards in a short period of time can cause your credit score to drop more significantly.
7. Check the card's terms and conditions.
Always understand a card’s terms and conditions before applying for it. That way, you’ll have a better understanding of any interest rates, fees, repayment terms, and other information that applies to the card.
How to apply for a credit card for the first time
Once you’ve understood some basic steps to take before applying for a credit card, you’re better prepared to start applying for one. But what is the credit card application process, and how do you navigate it without too many problems?
What do you need to apply for a credit card?
In order to apply for a credit card, you’ll need certain information like proof of identification (such as a social security number or taxpayer identification number). You may also need to show proof of age (such as an I.D.), since you generally have to be at least 18 to apply for a credit card.
Where to get a credit card for the first time
Applying for your first credit card directly from a bank can be a good choice. A good option may be a bank you’ve already opened a checking or savings account with and continue to use. These institutions can see if you’ve handled your account well and may be more likely to approve your application for a credit card if you’re in good standing.
Compared to retail stores, banks also tend to offer more credit card options, like secured credit cards. Retail stores, on the other hand, will often have a more limited number of cards to choose from, and they may only reward you for shopping at their stores.
What to do if your credit card application is denied
If your credit application is denied, you should first take a look at the possible reasons your application may have been rejected. Do you have poor credit, not enough credit history, or insufficient income? All these factors could play a part in a rejected application, and you should address them if you want to increase your chance of obtaining your first credit card.
But how do you know why your application was denied? This is where adverse action letters come into play.
Adverse Action Letters
Adverse action letters are a document required by federal law to be sent to you whenever you’ve been turned down for a loan, credit card, or job because of information on your credit report. They give reasons on why you’ve been rejected, as well as your current credit score and a notice of your right to a free copy of your credit report. Once you understand the reasons you’ve been denied, you can get an idea of what actions to take to improve your credit and decrease the likelihood of another rejection.
When you’ve received an adverse action letter, it’s helpful to check your credit report from at least one of the credit reporting agencies. This will give you a better picture of what factors are holding you back and whether there are any errors in your credit report. It will also help you form a plan to start improving your credit score.
Tips on using your first credit card
Once you’ve been approved for your first credit card and receive it, you’re free to start using it. Keep in mind, though, that there are some practices you should follow to use your card responsibly, such as:
Make Your Payments on Time
When using a credit card, you should always strive to make at least the minimum payment by the due date each month. That way, you can avoid penalties for late payments, such as late fees or higher interest rates. To avoid interest charges completely, you should focus on paying the full statement balance by the due date each month.
Not only will timely payments help you avoid penalties, if you focus on paying the full statement balance by the due date each month or at least as much as you can with these payments, but they can also help you keep your balance at a manageable level.
Keep Your Account Balance Low
Try to keep the balance on your credit card low. It’s generally recommended to keep your total credit utilization ratio, which is the amount of credit you’ve used divided by your total credit limit, below 30% to avoid damaging your credit score. In addition, if having a high balance on your card means you are unable to pay your full statement balance by the due date each month, carrying over a balance in the next cycle will typically cause you to incur more interest.
Check Your Monthly Statements
Your credit card’s monthly statement will inform you of the statement balance, which is the total amount you owe on your credit card as of the last day of your previous billing cycle . The monthly statement should also provide an accurate picture of the payments and credits made and charges, including interest and fees, incurred during that billing cycle. It can help you know when you’re sticking to your budget or straying away from it.
Stick to a Budget
Even though a credit card adds to your purchasing power, you should still form a budget and make sure that your credit card usage falls within the limits of that budget. That way, you’ll make purchases with it that you can afford and avoid using it irresponsibly.
Be Aware of Credit Card Fees and Interest Charges
You should always understand the context in which a credit card issuer can apply a fee or interest charge. That way, you can adjust your usage of the credit card as necessary and try to keep fees and interest charges down to a minimum.
Use Your Card Fairly Regularly
If you don’t use your credit card regularly, you could risk your issuer closing your account. Try to use your card at least once every three months, if not more. That way, your account will likely still be considered open and active, and you can continue to build your credit over time with the card.
Credit cards offered by Citi
Secured cards like the Citi® Secured Mastercard® and rewards cards like the Citi Custom Cash℠ Card are great choices when looking to apply for a first credit card. Whether you want to use a secured card to build up credit or a rewards card that earns cash back on everyday purchases, these credit cards from Citi are a great way to get started.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
