Your First Credit Card - Where to Start
Sensibly using a credit card can be one of the best ways to build and strengthen your credit score whether you have a poor credit history or are new to credit. However, choosing your first card can be pretty daunting as there is so much choice out there.
Where to start
When looking to apply for your first credit card start by checking out those that offer introductory offers on purchases (when you don't pay interest on balances for a specifed number of months) as these can be useful if you intend to spread payment for a larger purchase. Credit cards offering bonus rewards such as cashback (where you get a certain percentage of your total spend back) can be a good idea too as you are immediately benefiting from what credit cards have to offer.
Don't fall into the debt spiral
Be careful though as some lenders can be picky about whom they lend to, only giving cards to those with a strong credit history. If you are rejected by one of the major card companies don't just apply for another leading offer straight away as if you fall into the trap of applying and getting rejected again and again it won't do your credit score any good at all, instead you should consider your other options.
Loyalty might pay
Some people choose to apply for a credit card from the bank that holds their current account. While in some instances this may work in your favor as they are already familiar with your financial history, unfortunately loyalty doesn't always pay. If your bank sees you as a potentially risky borrower they're no more likely to lend to you than they are to someone who isn't a customer.High interest starter options
There are an increasing number of cards on the market that are specifically designed for individuals with a less than perfect credit history and if used properly these cards can be the ideal way to build your credit score. Providers of these credit cards will often consider applicants that other lenders would reject, such as those with a history of defaults, CCJs or little credit experience. While this is good as it means they're more likely to consider you as a first time borrower, it also means that they charge an extortionate rate of interest to cover their investment.If you are successful in your application for a card of this nature it is vital that you pay off your balance in full each month otherwise extra interest will accumulate incredibly fast and you will end up in trouble, unable to pay off your card, before you even begin. The only way to use these types of cards is as a tool for building your credit history. After several months of regularly spending on your card, meeting payments on time and paying off the balance in full you should be in better stead to apply for a card with lower interest rates and better benefits.
The last resortAn alternative option to applying for a credit card is going for a secured payment card. These can be used in all the same places on a credit card but instead of borrowing from a lender you place a prepaid deposit with the card company which you can then spend using the card. While these are convenient in the sense that they allow you to make purchases online and over the phone they tend to charge high fees, often in the form of taking a certain percentage per spend. Despite this they do provide a viable credit card alternative.
By starting with a basic credit card, spending and clearing the balance of your regular purchases in full and ensuring that all of the details on your credit score are correct you should be in a better position to apply for market leading credit cards.
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