Applying for Your First Credit Card

In a previous post, I wrote about how credit cards can cause you to spend more money than you otherwise would. Still, credit cards can be incredibly convenient, and some of the time you’ll really need them. Given those benefits, many young people wonder how they can get a credit card as a teen or young adult.

If you are under 18, talk with your parents or legal guardian. In fact, you should probably do this even if you are above 18. Certain credit card companies will prey on young people by offering easy credit or low initial rates that jump up later in the card, and you don't want to start off on the wrong foot.

Older people, who tend to have had more credit cards, will have more experience with these tactics, and they can help you find a card that suits your needs. They can also help you manage responsible spending, which is important if you don’t want to run up massive amounts of debt. And trust me—you don’t want to run up massive amounts of debt.

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Research the fees associated with different credit cards. Although it is possible to get a credit card that is entirely free if used properly, that can be difficult to achieve. Unless you are vigilant about your spending, monitoring your credit card statement, and paying your bills promptly, it is easy to incur fees without even realizing it.

My recommendation is to head to your bank and meet with a representative in-person to discuss your credit card plan. By meeting with an agent in-person, I was able to get the $39 starting fee waived on my credit card, and I was also able to set up my credit card to work properly with my bank account. If you don’t wish to head to a bank, you can find a list of different credit card fees here, although I recommend using both resources. More knowledge about fees is better.

As a young person, you should probably seek out a card without an annual fee. Some credit cards will charge consumers annual fees as $500 in return for extravagant offers for rewards points, but your spending likely won’t be high enough to capitalize on those rewards. Also, as enticing as those rewards might seem, many of them carry restrictions about when you can use them, how they can be redeemed, and other factors. It is best to stick to a simple credit card while you are first getting familiar with the process. (If you are looking for a card without an annual fee but that still offers rewards, I recommend the Bank of America Cash Rewards card, to which I recently upgraded. Rewards cards often charge higher interest rates if you don’t pay your bills promptly, but if you do pay your bills on-time, they can be a great value.)

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Discuss with your bank the ways to get approved as a young person. Although banks likely won’t tell you this until you receive a form letter rejecting your application, many will not give standard credit cards to young people lacking a credit history. Don’t fret, though; there are still ways to get approved for that card.

Perhaps the most common way to get a legitimate card as a young person is to “secure” your credit card. Securing a credit card typically means putting up collateral—typically cash—to cover your purchases in the event that you cannot cover your bills. In effect, a secured credit card is much like a debit card or declining balance card, except that you must continually replenish your balance. By securing the card, you allow the bank to trust you, even without a credit history, and you get to build up your credit score by showing that you can be trusted. As long as you pay off your bills, it's a win-win scenario.

Another way to get approved as a young person without credit history is to have someone else co-sign the account, meaning that they will be liable for the debt if the cardholder cannot pay their bills. For young people, the co-signer is typically their parents, who have had more years to develop a credit history. Because your parents will be on the hook for your finances, it is important to sit down with them and discuss your plans for using the card. They also might request access to your monthly credit card statements in return for co-signing your account. Although it might seem like an invasion of privacy to have them looking over your shoulder, it is important to have some supervision when beginning your credit card experience. Try to understand where your parents are coming from, and if it bothers you so much, discuss with them some alternatives that you might consider instead.

Keep your number of credit cards to one. It is really easy to lose track of your spending if you spread it across four or five cards, all with different bills to pay. Make it easier on yourself by keeping your expenses all on one card that you can easily monitor and manage. Also, it can hurt your credit score to apply for too many cards, so try to take it one-at-a-time until you hear back about the result. Even if you’re rejected, that rejection notice can help you be approved when you apply for your next one, so it’s important to not rush the process.

Credit cards can be difficult to manage, but taking the right steps in applying for your first one can set you up for a lifetime of good habits. Make sure to do your research so that you know what you are getting into, then sit down and discuss with someone trusted how you are going to use your credit successfully. Follow the above steps, and you should have your first credit card in no time.

Looking for ways to manage your spending? Concerned about using your credit card wisely? Check out our newest FREE resource, Mint, to easily analyze and improve your finances! Don't have a credit card yet? It works with bank accounts, too! Sign-up for Mint today!



Photo above available here.