First time credit cards are those cards that are geared towards helping people establish a credit record for the first time. Typically, these people will be college students, or at least those who have just turned eighteen and are now eligible for credit.
However, it is a challenging experience, since you need to establish good credit records in order to obtain good credit deals, and yet you are also likely to have very limited experience when it comes to issues such as interest rates, fees, penalties and even managing your money effectively. There are plenty of pits to fall into, and it is wise to spend a little while making sure you understand the various aspects and implications of getting a first time credit card, and what your likely obligations and responsibilities will be – both to the bank and to yourself.
The first thing that you will need to accept is that being a newcomer to the world of credit, and having little or no credit history under your belt, there is a very real chance that you will have to accept a card with a high interest rate, typically in the twenty percent region. This means that any money on your card that you don’t pay off will be charged interest at this rate. If you have a large balance unpaid, and this remains unpaid for several months, you can easily find yourself paying very large sums of money just in interest.
For this reason, it is always wise to make sure that you pay as much of the balance off each month as you can. The perfect arrangement is where you can pay off the complete balance each month, in which case you should never have to worry about those interest rates, as you won’t need to pay them.
However, paying off the entire balance each month is only possible if you don’t use your first time credit card as though it was a pocket full of free cash, spending it on unnecessary or expensive items just for the sake of it. The trouble is that being given your first credit card can feel a little as though you have been given free cash and the temptation to enjoy yourself is very real.
Generally, credit companies know this even better than you do, which is how they get to make so much money. But there is another risk to spending too much and being unable to pay off the balance, besides having to pay extra amounts in interest and fees.
Your credit history may well be a clean slate when you first open your new credit card, but every month that you have the card, details of how you are maintaining the account will be entered on your record. This record will stay with you for many years, and will greatly affect not only the likelihood of being accepted for further credit and bank account facilities in the future, but the rates you may well be offered too.
If you get into difficulties with your first time credit card then your credit history will already suffer, and you can find it harder to get a bank account, credit facilities, loans and even a mortgage in future. Start as you would wish to go on, maintain your new card in good order, and you’ll build yourself an excellent credit history that will mean that after six months or a year you should be able to open a credit card with a much lower interest rate and fewer fees.
When you first turn eighteen you may well find yourself bombarded with adverts offering you your first credit card, and it is tempting to take up several of these offers. It is best not to do this since the more applications you make, the more footprints there will be on your credit file. These footprints won’t reveal whether you were successful or not, but the number of footprints can start to become an issue – one that could harm your overall rating.
It’s also important not to open one card just to pay the balance on the first card – this credit card domino effect tends to end up in all your spare cash going into paying off the interest accumulating rather than the balance. If you’re looking for a first credit card, then stick to just one for the first few months, and then look to upgrade if that has gone well.
First time credit cards will generally have fewer rewards and higher rates and penalties. They are for people who the credit card companies consider represent high risks, or at least unknown risks. They give you a great chance to create a positive record, as well as giving you a revealing insight into how good you really are likely to be with money.