Sponsored by Capital One
Picking your first credit card can feel overwhelming. There are hundreds to choose from and how are you supposed to know what’s best for your unique situation? Parents, older siblings and friends may give advice – but personal finance is personal. What works for your loved ones isn’t necessarily the best card for you. However, there are six factors you can take into consideration to narrow down your options and find the credit card that’s best for you as you start building your credit history.
1. Ditch the credit card fees
43% of our generation deem little to no annual fee as the most important factor when considering which credit card to get, according to a Capital One survey. This gut feeling is spot on.
There are lots of credit cards out there all with various benefits, but why pay an annual fee (or any fees) if you can avoid it, especially when you’re a fledgling adult just starting to figure out the basics of a budget? Plenty of cards offer no annual fee. Run far away from any company asking for an activation or startup fee.
2. Be sure the credit card you select reports to the credit bureaus
A credit card serves as a simple, effective way to start building your credit history and score. It allows you to get into the coveted 700+ credit score group without taking on any debt (like loans), as long as you pay off the card on time and in full every month. However, you can only get there if your credit card usage actually gets reported to the credit bureaus – or at least one bureau. It’s likely any card you take out would report to at least one bureau, but it never hurts to confirm.
3. Understand the APR and how to read your bill
You want your credit card to work for you. It’s important to understand the terms, especially how the annual percentage rate (APR) on your credit card works. The APR will be the amount of interest you’re charged on those items you bought if you don’t pay off your card in full by the due date. Paying just the minimum due, or anything less than the full balance, will lead you down the path of paying interest. Be aware of the APR rates when you are looking for a credit card and factor it into your decision making. Or even better, just avoid it from the get go by paying off all your purchases on time and in full every month.
4. Access to your credit score
There are plenty of tools out there allowing you access to your credit score, but it is important to find one that is not only FREE, but also offers more than just your number. These days, you can access versions of your credit score for free through a variety of methods, but one of my personal favorites is having access via my credit cards. Four of my six credit cards provide monthly credit score updates. You can also use 100% free tools like CreditWise from Capital One, which is available to everyone – whether you have a Capital One product or not. Tracking your credit score helps you see if your behaviors are helping or hindering your progress. It’s also an excellent way to detect identity theft if your score suddenly plummets when you haven’t changed your own behavior.
5. Fraud security
Listen, fraud happens. Even the most diligent among us might eventually get hit with a dose of credit card fraud. I myself have been victim four times on three different cards and it’s a pain. It would’ve been even more stressful if I were on the hook for any of those charges. Be sure your credit card comes with a $0 fraud liability benefit, so you won’t be liable for that $700 shopping spree someone went on in your name.
6. Rewards shouldn’t be your focus – yet
Rewards are awesome. Trust me, I’ve done my fair share of traveling by leveraging credit card rewards. But focusing on rewards is more of purple-belt-level financial power, and as a first-time credit card user, you’re a white belt. Capital One’s Platinum MasterCard gives those new to credit cards access to a regular, unsecured card with no annual fee. Not only that, the card comes with added perks that will help you build your credit with responsible use, such as alerts and the ability to customize your payment due date.
Once you’ve proven to yourself – and the credit card companies – that you can handle monthly access to credit without getting yourself into financial trouble, then you can consider leveling up to a card with healthy rewards.
How did you select your first credit card and what was most important to you?
Disclosure: I was compensated for this post for Capital One, but opinions and advice are my own. However, there are no affiliate links in this blog post. I will not receive payment if you sign up for any products mentioned in this article.