As a credit card expert who studies and writes about this industry full-time, I’m regularly asked to recommend credit cards to my family and friends. I’m often asked what type of card to get first, whether it should earn rewards, and how many cards to apply for. Unfortunately, there is no one answer that applies to everyone; ultimately the right card will depend on the person using it. But, in general, I recommend those new to credit apply for a card with low interest rates and fees and simple rewards. These cards are often designed for applicants with little credit history, and are a perfect way to start using credit and learning how to manage it responsibly.
The Simple Dollar’s Picks for Best First-Time Credit Cards
Just as I wouldn’t teach someone to ride a bicycle using a racing bike with thin tires and 20 gears, I wouldn’t recommend a first-time credit card holder apply for a costly travel rewards card with dozens of features and benefits. It’s also unlikely that someone new to credit would be approved for that type of card. Instead, those who are new to credit cards should focus on finding a simple card with low rates and fees, and perhaps modest rewards — think of it as a credit card with training wheels. The cards below are a great place to get started.
- Discover it® Cashback Match™
Best Bonus Cash Back
- Barclaycard Rewards MasterCard®
Best Cash Back on All Purchases
- BankAmericard® Credit Card for Students
Best for Students
- Capital One® Platinum Credit Card
Best for Building Credit
What should you look for in your first credit card?
The first thing to look for is a card that’s designed for someone with your credit profile; this increases the likelihood that your application will be approved. For those new to credit, this means a card that is marketed to people with “fair” or “average” credit scores (between 650 and 699). However, if you’ve had serious credit problems in the past, then you will have to apply for a card that is designed for those with “poor” or “rebuilding” credit (scores below 650). If you don’t know your credit score, there are many free services to get it, such as Discover’s Credit Scorecard with FICO Score.
Next, look for a card with low interest rates and fees, including annual fees, late fees, and foreign transaction fees. And, while credit cards designed for new users usually have higher interest rates than those marketed to customers with “good” or “excellent” credit, you can still look for a credit card that offers a competitive interest rate. For first-time credit card applicants with fair or average credit, you should expect to find interest rates between 20% and 25%.
Other features worth comparing are cardholder benefits such as purchase protection and travel insurance. For example, most credit cards offer car rental insurance, which lets you forgo the expensive insurance offered by the car rental company, and many cards feature an extended warranty policy that can add a year to the manufacturer’s coverage. This is a great way to extend the warranty on expensive electronics and appliances without paying extra for the retailer’s added coverage option.
Finally, some may want a card that offers rewards. While there are not many reward cards that make sense for first-time credit card users, there are some, like the Discover it® Cashback Match™ and the Barclaycard Rewards MasterCard®. I’m cautious about recommending reward credit cards to new cardholders, though, since the opportunity to earn rewards sometimes incentivizes overspending. As someone new to credit, your first priority should be building credit by managing your card responsibly, not earning rewards. After a year of responsible credit card use, those who always avoid interest by paying their monthly statement in full should have no problem qualifying for a card with better rewards programs.
Top Picks for First-Time Credit Cards
Best for Bonus Cash Back
The Discover it® Cashback Match™ is an excellent choice for first-time cardholders. All Discover cards offer low fees including no late fees, no annual fee, no foreign transaction fees, and your first late payment fee is waived automatically. As with many credit cards, the interest rate you receive will vary based on your credit score when you apply, but this card has no penalty interest rate. (Most other credit cards will increase your interest rate after a payment is missed.)
Discover also offers a free monthly FICO score to everyone, even those who are not customers. Keeping track of your credit score each month allows you to spot minor problems before they become serious, but as your credit score improves, you’ll be able to upgrade to a better card with more rewards and lower interest rates. Another feature that Discover is known for is its 100% US-based customer service, which draws raves from everyone I know, and has resulted in customer service awards. The Discover card also comes with a strong package of purchase protection benefits including extended warranty coverage, as well as purchase protection plans, return protection, and price protection plans.
This card features rewards in the form of 5% cash back up to the quarterly maximum rotating categories, like gas, restaurants, Amazon.com, wholesale clubs and more, and 1% cash back on all other charges. And with all of its cards, Discover is currently matching the rewards earned during your first year as a customer. At the end of that year, you will receive a cash back bonus equal to the rewards you’ve already earned.
Those who’ve had problems with their credit in the past should apply for the Discover it® Secured Card - No Annual Fee, and students are offered their own versions of this card called the Discover it® for Students.
Best Cash Back on All Purchases
The Barclaycard Rewards MasterCard® card has no annual fee and offers rewards for spending, making it ideal for first-time cardholders who will pay their balances in full each month. You earn double points for gas, utility, and eligible grocery store purchases and one point per dollar spent everywhere else. Each point is worth one cent and can be redeemed in the form of deposits to a checking or savings account, credits toward your statement, or gift cards (1,000 points equal $10). As a reward card, this can be a good choice for those new credit card users who plan to avoid interest by paying every statement balance in full. If you plan on carrying a balance, you will be better off with a non-rewards card that offers a lower interest rate, like the BankAmericard® Credit Card for Students.
Cardholders also receive free online access to their FICO credit score. The standard interest rate for purchases, cash advances, and balance transfers is 25.24% APR, which is a variable rate that can change with the Prime Rate, comparable to most other credit cards. This is a little higher than similar cards that don’t offer rewards, so this is not a card for those who plan on incurring interest charges.
Best for Students
The BankAmericard® Credit Card for Students has no annual fee and offers a standard interest rate of 12.99% – 22.99% APR, variable, which is a very competitive rate for a student credit card. Bank of America also appeals to students as one of the more tech-enabled card issuers. Its cards are fully compatible with digital wallet technologies such as Apple Pay®, Android Pay™, and Samsung Pay. In addition, it features online and mobile banking, text alerts, and even the ability to generate secure, temporary credit card numbers. There is no annual fee for this card, but it does have a 3% foreign transaction fee. Those who regularly make purchases outside the United States will want to take a different card with them when they travel.
Bank of America is a retail banking giant that offers a range of cards for students. One advantage of its cards is that existing Bank of America customers who open up a credit card account can manage all of their accounts with one login. And when you have a credit card with the same company that you have a checking account with, making your credit card payment becomes merely a matter of transferring funds between accounts, not between institutions. For first-time credit card users, this simple method of managing your account can be much better than having credit card and checking accounts with separate banks.
Best for Building Credit
As another card offered to those with “fair” or “average” credit, the Capital One® Platinum Credit Card is another good choice for those who need to build or rebuild credit. New customers receive a modest initial credit limit, typically between $200-$500, but you can receive access to a higher credit line after making your first five monthly payments on time, through Capital One’s Credit Steps program. This gradual increase can act as a set of training wheels for first-time credit card users to learn how to use credit responsibly. It also offers unlimited access to your credit score and tools to help you monitor your credit profile with its CreditWise online tool. Other benefits include extended warranty coverage and price protection policies as well as 24-hour travel assistance and roadside assistance referrals, although you will be responsible for paying for any services received.
This card has no annual fee and a standard interest rate of 24.99%, variable. And like all Capital One cards, there are never any foreign transaction fees imposed on purchases made outside of the United States.
Did You Know?
There are three types of first-time credit card users.
In general, I find that there are generally three different types of people looking for their first credit card. The first and most common type of new credit card users are college students, young adults, and recent immigrants who have little or no experience with credit cards or other kinds of loans. In the credit card industry, these consumers with few entries in their credit reports are referred to as having a “thin file.” These cardholders should look for a basic card or one designed specifically for students.
The second type are adults who have been avoiding credit cards throughout their life. For example, many in the so-called Millennial generation grew up during the Great Recession and the corresponding consumer credit crisis. After watching millions of Americans lose their homes to foreclosure (possibly even their own family members), they have decided that the best way to stay out of debt would be to never open up a credit card account. But eventually, most find that a credit card is essential to building the credit history needed to qualify for good rates on a car loan or home mortgage. These cardholders likely have decent credit, but will want a simple card with which to learn the ropes.
The third group of people are those who have had problems in the past with other forms of credit, and are now looking to apply for their first credit card as a way of improving their credit history and raising their credit score. Since a credit card is often the only form of credit they can qualify for, it’s seen as the first rung of the ladder they need to climb in order to rebuild their credit history. Nevertheless, these cardholders will only qualify for a special type of credit card called a secured card.
Tips for applying for your first credit card.
It can be intimidating to apply for your first credit card. The application can be long, and you might be unsure of how to answer some questions. When it comes to the question about your income, it’s important to remember that you can include many different sources of income, not just employment. For example, you can include government benefits such as Social Security as well as any investments, small business income, child support, or alimony payments that you receive. In addition, you can also include the income of your spouse or domestic partner, so long as you have access to it. The higher your income, the higher the credit limit for which you’ll qualify. In addition, make sure that the information you supply is as accurate as possible, as your application can be denied if it doesn’t match up with your credit history.
And, if for some reason your application isn’t initially approved, you shouldn’t accept the decision as final. You can actually call the card issuer and ask a representative to re-examine your application and reconsider it.
Managing your first credit card account.
First, you should always go over every charge on your statement to ensure it’s both legitimate and accurate. Thankfully, credit cards come with very strong protections against fraud, but you still have to report any fraudulent transactions to your card issuer in order to have the charges reversed.
Secondly, you must make a payment to your account each month that you have an outstanding balance. The payment must be at least the minimum payment, though paying in full should always be your first choice, and it must be received on or before the statement’s due date. Here, I prefer making payments by using my bank’s electronic bill pay features. However, others prefer to enable automatic payments through their card issuer, which can be the safest method of payment for new credit card users in that it’s unlikely you’ll miss a payment. If you decide not to use automatic bill payments, then you might wish to enable electronic reminders via text or email, a feature that most card issuers now offer. The main thing to remember: Pay in full and pay on time.
When it comes time to schedule your first payment, the most important decision you will have to make is how much to pay. By far, the best way to manage a credit card account is to always pay its entire statement balance each month. When you do so, you will never incur costly interest charges, but it also has a few other advantages. Paying your statement balance in full each month also means that you will never have a problem with credit card debt. In addition, making on-time payments means that you will quickly build a strong credit history.
Avoiding debt is a great habit to be in as it forces you to live entirely within your means. Those who choose to carry a balance on their credit cards tend to rationalize their decision by citing the importance of their purchases, but that becomes a slippery slope. Eventually, many credit card users get into the habit of regularly carrying a balance, often because they have gotten carried away when shopping, going out with friends, or taking a vacation. For example, if you spent $150 at the grocery store, it will actually cost you over $190 if you pay it off over two years, with an interest rate of 25%. So even though you are only paying $8 a month for your minimum payment, you end up paying much more for your groceries overall.
By deciding in advance that you will always pay your credit card statement balances in full, it forces you to immediately consider how each purchase will affect your bank account, and to look at your credit card as just another method of payment, not a means of finance.
Receiving your first credit card is both an incredible opportunity and a huge responsibility. By choosing the right card, you can enjoy the security and convenience that credit cards offer while utilizing valuable benefits and even earning rewards. And by using your new credit card responsibly, you can build your credit history, increase your credit score, and make it easier to qualify for a car loan or home mortgage with great rates. This can be a fantastic opportunity, but it’s up to you to make the right decisions.