Your First Credit Card: Fresh Start Series

By: Horizon Bank Last Updated: August 11, 2011

credit-cardsYou saw some of your friends in college make superfluous credit card purchases such as expensive dinners and designer clothes that they couldn’t actually afford, so you decided to play it safe and not get a credit card to limit your spending habits. But not establishing credit can also cause problems: it can impact your ability to qualify for auto loans, mortgages, and even credit cards.

So where do you start to establish good credit? Applying for a credit card and paying your bills on time is a good first step. Shop around to find out which credit card is right for you. Here are three questions to ask before choosing your first credit card:

1. Who is the issuer of the credit card?

The institution offering the credit card sets the terms and interest rate of your card. Try to avoid cards geared toward consumers with bad credit as these companies usually have high interest rates and less reward points or incentives.

2. What is the cost of borrowing?

Research the credit limit and the interest rate charged on outstanding balances. Look for cards with a “grace period” which allows you a certain number of days to pay off your balance before being charged with interest. Also avoid "0 percent interest" offers since many of these rates will rise excessively after the introductory period.

3. What are the incentives?

Some credit cards will offer cash back depending on your purchase amounts while others offer gift cards for gas or groceries. Choosing a credit card with added perks is a great way to benefit from your purchases.

Once you obtain a credit card, be sure to pay all of your bills on time. Here are a few other tips for using your first credit card:

  • Avoid using your credit card for everyday purchases.
  • Try to use your credit card a few times a month. An inactive card will not help your credit score.
  • Keep your number of cards to a minimum. Applying for too many cards will hurt your credit score and make it easier to miss payments.

Applying for your first credit card is a great way to establish credit and make big-ticket purchases. Choose a card from a trustworthy company with fair rates and attractive incentives and use it wisely so you can make your first credit card experience a success.