How to choose your first credit card

If you’re thinking about your first credit card, there can be a lot of information to take in and it can all feel a bit confusing. How do you know which is the best first time credit card and how do you even apply for one? We spoke to the experts at Experian to bring you all the answers you need in one place.

What can I use my first credit card for? 

You can use a credit card to borrow money for spending. Every credit card has a pre-set limit and you can only spend up to that amount, although you can apply to change the limit. Find out about other types of credit here.

How do credit cards work?

There’s a lot to think about and be aware of when you’re choosing a first credit card and when you first start using it. Here are all the key things you need to consider to use your card safely and avoid credit card debt.

Monthly minimum payments

Credit cards have a monthly minimum payment that is due on the same day every month. You need to be aware of what this is (it will appear on your statement and in your banking app) and pay at least this amount in order to protect your credit history and avoid paying interest. It’s best to pay off the full balance of what you have borrowed each month if you can, to avoid getting into any debt (or at least as much of it as you can afford).

Annual Percentage Rate (APR)

Always make sure you know what the APR of your credit card is. The APR is the total cost of your borrowing each year, including the interest and any fees. 

It’s really important to understand any fees you might be charged, for example if you go over your credit limit, withdraw cash or make a late payment. Some credit cards also charge an annual fee to use them, and if you choose a balance transfer card they can sometimes charge an opening fee.

Credit limits

Your credit limit will be set by the credit card provider, depending on your financial situation. It’s important to think about whether the limit is right for you, i.e., high enough for what you need to spend and low enough to make sure you don’t spend more than you are able to pay back.

Interest-free days

Credit cards usually come with an interest free period of up to 56 days, which starts when you first purchase something. You can read your terms and conditions to find out how long this interest free period is.

How do you know which is the best first credit card?

With so many different interest rates, fees and types of credit card, how do you know which is the best first credit card? Here’s a summary of the most common types of credit cards and what they offer.

Types of credit cards

Balance transfer cards offer 0% interest on your balance for a fixed period of time; they are usually used by those who have a credit card already and want to transfer the balance over to avoid paying interest. There is often a transfer fee.

Reward cards can be chosen depending on your lifestyle and priorities, for example: 

• You can get a cashback card, which pays you back a percentage of what you spend.
• You can choose a points card, which allows you to build up points that you can use to pay for things. 
• If you travel a lot you can choose a card that offers discounts on flights and hotels.
• There are also retail rewards cards that give you bonuses with specific shops. 

0% purchase cards don’t charge any interest for a fixed period of time, so you have a bit more of a window to pay off your balance without any charges.

Credit-builder cards can be used to improve your credit history if you have previously been in debt, or have a low credit score. They can be easier to apply for but usually have a higher interest rate.  

What do you need to do before applying for your first credit card?

Credit card providers will review your financial behaviour before they approve your application for a credit card. If you want to get the best possible credit card for you, there are some steps you can take to improve your credit rating. 

Spread out your credit card applications – you can damage your credit score by applying for too many credit cards or loans in one go.

Learn more about how to boost your credit score.

Keep up your payments – your payment history is really important and a record of missed payments could affect your application.

Don’t spend beyond your limits – you will appear as higher risk if you are close to your bank limit on other credit cards

How do you know if you’re eligible for your first credit card?

Protect your credit score by working out if you’re eligible for a credit card first to reduce the number of applications you need to make. 

You can use platforms such as Experian to work out eligibility, who will share a range of options for you based on your criteria, with a rating of how likely you are to be accepted.

You can also do research on sites such as Money Supermarket.

How to apply for your first credit card

You can apply online, or if you prefer to speak to someone in person then you can g to one of the provider’s local branches. 

What are the benefits of using a credit card?

If used sensibly, credit cards can be a helpful way to spread out the cost of payments, or paying for larger transactions in a way that suits you, rather than having to pay out a lump sum all at once.

The perks of some credit cards, such as points for flights or shopping, can help you save money on purchases. For purchases between £100 and £30,000, if you pay at least some of the cost on a credit card then if something goes wrong you may be able to claim from the card provider, as under the law they are liable alongside the retailer.

What are the risks of using a credit card?

The main risk is getting into debt. If you fall behind on your repayments then the sum that you owe will keep increasing. To find out more how to avoid this, read our guide on how to manage money.

It’s crucial to remember that credit cards are very different to debit cards as the money you spend on a credit card isn’t your money – it’s borrowed. You will always have to pay the money back at some point. 

The Mix would like to thank Experian for their support with this article.