Here’s How to Get Your First Credit Card

Some individuals may be unable to afford their desires, primarily due to their financial situation, even though most people have their wishes. As a result, various economic goods and services, such as personal loans, mortgage loans, and credit cards, may assist individuals in affording their desires. Among these options, the credit card seems the most convenient, owing to its ease of use and ability to apply. However, those who want to apply for it must meet the prerequisites. Some individuals will be curious about the application requirements and the minimum age required for obtaining their first credit card. This article will provide answers to these queries.

When Will I Be Able to Get My First Credit Card?

This is primarily one of the first questions about this topic. The conventional response will be when you meet the minimum age criteria for applying for a credit card, which varies from bank to bank. To be eligible for a first one from some financial institutions, applicants must be 18 years old. However, to apply for a first one at some banks, applicants must be at least 21 years old. The maximum age limit also varies but often ranges to sixty years old.

Because of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, it is now much more difficult for those under 21 to receive an unsecured first one. To qualify, they must provide evidence of a stable income. If they cannot show evidence of payment, such as a job, they will need a cosigner or being an authorized user on the credit card of a friend or family member.

When applying for a first credit card, age isn’t the only aspect; preparedness and financial liquidity are also essential considerations. People need to have well-balanced money management because they will incur debt if they have a credit card but are incapable of managing their finances. For these reasons, before applying for your first one, you must consider this essential information.

Is It Possible to Get a Card Before the Age of 18?

The answer to that question is “yes.” However, there are a few more steps to the process. Before turning 18, applicants have two options for obtaining their first one.

Becoming an Authorized User on Another Card

If you are under 18 and desire your first credit card, you may get one by becoming an authorized user on another person’s card. This will give you access to it (usually from a parent or legal guardian). You must meet a minimum requirement to become an authorized user with some banks. You will get your card if someone adds you as an authorized user to their account. Nevertheless, the primary cardholder is still accountable for all purchases. If the issuer reports authorized user activity to the credit bureaus and the cardmember pays balances on time, becoming an authorized user on a credit card can help you get a better start on building a positive history. However, this is only if the issuer reports authorized user activity.

Use a Prepaid or Debit Instead of a Credit Card.

In addition, you can be eligible for a prepaid or debit, which is not the same as a credit card. You can still make in-store and online purchases with a prepaid or debit card, just as you do with a credit card. However, a prepaid card doesn’t have a credit line and thus cannot build credit because you cannot report to the reporting agencies. Instead, your account will deduct the cost of the card before you use it. Remember that credit bureaus don’t receive activity on prepaid cards; as a result, using these cards will not assist you in establishing credit.

The Signs that You May Be Ready to Acquire Your First Credit Card

As this article’s first topic said, you must meet the minimum requirements, and preparedness and financial liquidity are also essential considerations. You need to manage your money. If you are still unsure whether you are prepared to apply for your first one, the following signs can help you decide.

You have a stable income.

To maximize the use of a credit card, you must first be able to make monthly payments. Although this might change based on how much you spend, it’s a good idea to ensure that your income is sufficient to pay your card’s absolute limit. Thus, you will be less likely to be concerned about outstanding bills carrying over from month to month, accumulating interest, and placing you in debt. 

You must have a constant source of monthly income to cover expenses. Moreover, you also need to consider interest-free term. This should be sufficient to pay your living expenses and credit card debts.

You’re debt-free.

Before using a credit card to consolidate your monthly spending into direct payments, you should ensure that you can afford the whole amount. If you are currently paying off obligations, you may want to hold off on getting a credit card until you are substantially debt-free. Thus, you will not have to worry about monthly payments, which might burden your budget if you accumulate too many loans. 

This rule has some exceptions, especially mortgages with lengthier payback terms.

Understand how credit works

A credit is a defined amount of money by a bank that a person can use to make purchases without spending their own money. After the interest-free period, you must settle all charges in full; otherwise, the amount outstanding will grow depending on the interest rate. You must still pay for anything you buy; a credit card just delays the payment.

If you do not feel prepared for a credit card’s duties, other solutions are accessible. The most visible is a debit card, which provides the same functionality as a credit card but without the opportunity to spend money you do not have.

You can adhere to a spending plan.

Before acquiring your first credit card, one must know how to set a budget and adhere to it. Although getting your first one may make you feel as if you are earning money for free, it is essential to understand that this is, in fact, a debt. If you can not follow your spending plan, you will pay a higher interest rate than you should. 

You want to begin establishing a credit history.

Solid credit history might assist you in acquiring loans and gaining access to the lowest interest rates. However, if you can not manage your credit well, it will probably be a drawback to your credit.

5 Recommended Types of Credit Cards

1. Charge Card

Cardholders usually use this sort of card (Travel and Entertainment Card) to pay for travel and entertainment services since cardholders must often travel or entertain visitors. Its cardholders are often business professionals, executives, or people with solid financial status. This type rarely has a prepaid limit. You must repay your obligation within the allotted time frame without incurring interest. These examples include the Diners Club Card and the American Express Card (AMEX). These are also accessible to the middle class, but they must be able to make timely payments.

2. Credit Card or Bank Card

It is issued by a financial institution in combination with an international or a local credit card. This card is primarily intended to facilitate the payment of vital goods and services, although its credit limit is limited. This category comprises VISA, Mastercard, and bank credit cards, among others. It has the same payment capabilities as the Charge Card. In other words, the loan amount must be returned within the specified period without incurring interest charges. 

Moreover, cardholders have the opportunity to get a partial refund. In addition, cardholders have the option to repay a portion of their balance by utilizing revolving credit and incurring interest. In this instance, the amount is turned into a loan that cardholders must repay in monthly installments. This is a technique for card issuers to gain income while providing cardholders with more repayment options.

3. Store Credit Card or Private Label

This is the best one for consumers who often purchase at department stores. It is a credit card provided by major retailers or department stores for usage in their network. It is intended to promote the store’s sales, which may have accrued points or discounts as unique shopping privileges.

4. Cash Card

Its functions similar to an ATM card, allowing the cardholder to withdraw cash from any bank that accepts it. In addition, it is possible to withdraw some money without debiting the cardholder’s account. This card may be used only at banks or ATMs affiliated with cooperating banks to withdraw cash. The cardholder will pay fees and interest charges per the conditions of the card issuer. Using it to withdraw some money will incur far fewer fees than using a bank or credit card.

5. Debit Card 

Debit cards are equivalent to ATM cards. Since the transaction is a direct debit from the cardholder’s account, cash withdrawals or payment of goods and services will not use the credit. It is similar to a credit card, but no interest is charged. The particulars depend on the bank where the card account was opened.

Conclusion

In conclusion, you may apply for your first credit card if you meet the bank’s requirements, including a minimum age, along with other essential details, such as efficient money management and comprehensive related knowledge to prevent future debt. If you have these qualities, you are probably prepared to apply for your first one. Nevertheless, it would be best to remember that every financial move entails risk. Therefore, you must carefully examine the information before making a decision.

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• Debit Cards in India: Types, Benefits, and How to Apply
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Read more: Financial

Source: Investopedia, Nerdwallet