Let’s look at how to get your first credit card, as well as some tips that can make the process go more smoothly.
5 Things to know before applying for your first credit card
Before applying for your first credit card, there are some steps you can take to prepare:
1. Check your credit report
Before applying for a credit card, it’s a good idea to develop an understanding of your creditworthiness. You can do this by checking your credit report.
You can receive a free credit report every 12 months from each of the three major consumer reporting companies.
2. Consider a secured credit card
If you have limited credit history, you may have a better chance of being approved for a secured credit card. If approved for a secured credit card, you typically have to put down a security deposit, which serves as collateral on purchases. The deposit is generally equal to the card’s credit limit and is usually refundable when you cancel the card or upgrade to an unsecured card.
3. Consider a card that earns rewards based on your needs
Not all credit cards offer rewards. However, if you’re interested in applying for a rewards credit card, consider one that offers additional rewards for common purchases or for shopping at vendors you frequent. For example, if you enjoy dining out, try to find a card that offers rewards for making purchases at restaurants.
4. Limit the number of applications
Credit card applications typically trigger a “hard credit inquiry” or “hard credit pull.” A hard credit inquiry can cause your credit score to dip by a few points, impacting your credit score for up to a year. This means your credit can take a small hit with each credit card application you file. While this decrease isn’t typically significant for one credit card application, applying for many credit cards in a short period can cause your credit score to drop significantly. It can also signal to card issuers that you may be taking on more debt than you can handle.
5. Check the card's terms and conditions
Always read a card’s terms and conditions before applying. You’ll have a better understanding of APRs, fees, repayment terms and other information that applies to the card.
How to apply for a credit card for the first time
Let’s look at the credit card application process.
What do you need to apply for a credit card?
Applications typically ask for specifics like your legal name, Social Security number, gross annual income, current address and phone number. Before applying, you may want to gather documents like a government-issued I.D. and Social Security card for reference.
What to do if your application is denied
If your credit card application is denied, consider possible reasons why this might have happened. Do you have poor credit, not enough credit history or insufficient income? All these factors could play a part, and it can help to address them before filling out another application.
But how do you know exactly why your application was denied? This is where adverse action letters come into play.
Adverse action letters
An adverse action letter is a document that, by federal law, must be sent to you whenever you’ve been turned down for a loan, credit card or job because of information in your credit report. It should provide the reasons why you’ve been rejected, as well as the credit score used and a notice of your right to a free copy of your credit report. Once you understand the reasons why you’ve been denied, you can get an idea of what actions to take to increase the likelihood you’ll be approved next time.
When you’ve received an adverse action letter, it can also be helpful to check your credit report. This may give you a better picture of what factors are holding you back. It can also be an opportunity to check for errors in your credit report.
Tips for using your first credit card
Here are some tips for responsible credit card use:
Make your payments on time
Making at least the minimum payment by the due date each month can allow you to avoid penalties for late payments, such as late fees or higher interest rates. To avoid interest charges on new purchases, focus on paying the full statement balance by the due date each month.
Timely payments can help you avoid penalties, and paying the full statement balance (or as much as you can) by the due date each month can keep your balance manageable.
Keep your account balance low
Try to keep the balance on your credit card low. It’s generally recommended to keep your total credit utilization, which is the amount of credit currently in use relative to your available credit below 30%.
Having a high balance on your card could also mean you won’t be able to pay your full statement balance by the due date each month. Carrying a balance into the next cycle typically means you’ll be charged interest on whatever balance amount is carried over into the next billing period.
Stick to a budget
Getting a new credit card doesn’t mean your budget changes. Having a budget and monitoring your spending can help you observe responsible spending habits. Sticking to a sound financial plan will help you spend within your means and avoid unnecessary expenses, which could make paying off a credit card balance easier in the long run.
Check your monthly statements
Your credit card’s monthly statement will show the statement balance, which is the total amount you owe on your credit card as of the last day of your previous billing cycle. The monthly statement should also provide an accurate picture of the payments made and charges, including interest and fees, incurred during that billing cycle. Your statement can help you understand your monthly spending habits and whether you’re sticking to your budget. It can also be a good idea to scan the statement for transactions you don’t recognize, as these can indicate fraud.
Be aware of credit card fees and interest charges
Read the fine print and understand potential fees or interest charges. Understanding fees and interest can help you avoid or keep them to a minimum.
Credit cards offered by Citi
Secured cards like the Citi® Secured Mastercard® and rewards cards like the Citi Custom Cash® Card can be great choices if you’re looking to apply for a first credit card. Whether you want to use a secured card to build up credit or a card that earns cash back on everyday purchases, these credit cards from Citi are a great way to get started.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
