Applying for your First Credit Card
Two weeks after my 18th birthday, I walked into a bank to apply for a credit card. The banker was gracious enough to guide me through the process but proceeded with caution. She wanted me to first understand how to use the credit card in ways that would prevent me from falling into debt. She finally submitted the application and was surprised when I was approved for a few thousand dollars, given my age and lack of credit history.
I later realized that I was likely approved due to my relationship with the bank. I had a checking account with them for a few years, maintained a healthy balance, never had an overdraft, and had a steady income. An 18-year-old with the ability to borrow a few thousand dollars was still a big responsibility.
The Mindset
Before sharing best practices on how to start building your credit, I need to emphasize the importance of avoiding debt.
From the moment I began the process of applying for a credit card, I encountered a recurring theme: don’t fall into debt. It felt as if I was doing something wrong, but it was the best advice I could have received at the time.
During the first year, I used my credit card only for a handful of purchases because I was afraid of misusing it. I would make a purchase and pay off the balance the next day. This was a good habit I developed; they were small steps, but they were exactly where I needed to be.
The “don’t fall into debt” mentality comes from hearing personal anecdotes of those who have struggled with debt. The average credit card balance was $6,501 in 2023, according to Experian. Unfortunately, some people must turn to credit to cover emergencies, while others use it to support a lifestyle they cannot afford.
A credit card should be used primarily to build credit, not to support a lavish lifestyle. Consider using it only when you have the money to cover the purchase. If you want to be extra cautious, use the credit card to pay for fixed expenses like subscriptions or utility bills and pay it off immediately. Over time, you can start using it for necessities like groceries or gas. With experience, you will learn when you can use it even more frequently. It’s crucial to pay the balance in full before the closing statement date to avoid incurring interest. Don’t fall into the bad habit of charging purchases with the idea of paying them off later, this can quickly spiral out of control. I’ve seen this become a habit that leads to accumulating debt.
Where to Start
Before applying for a credit card, check your credit score to see where you stand. You likely won’t have any history, but it’s still good practice to check.
Approval odds can vary depending on the institution. There are various credit cards designed for new credit-builders. Depending on your situation, some might be better suited for you.
Check with your bank first. Since you already have an established relationship, the approval chances are better if you’ve been a good customer (e.g., had steady income, no overdrafts, and maintained a balance).
If you’re a college student, search for credit cards that fit your needs. NerdWallet is a great place to compare the cards available.
Consider a secured credit card as an alternative. A secured credit card requires a down payment, which the lender keeps until they deem you worthy of a regular credit card. If you demonstrate responsibility, you’ll be upgraded to a regular credit card and receive your money back. Note: treat this card like a standard credit card; each time you use it, you are essentially borrowing from the lender.
Look for credit cards that offer soft inquiry pre-approvals to gauge your chances of getting approved.
Pay balances in full before the closing statement date to avoid incurring interest.
Most importantly, build an emergency fund to cover unexpected expenses and avoid relying on credit cards for unexpected expenses.
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