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The Complete Guide to Beginner Credit Cards

The Complete Guide to Beginner Credit Cards

Your credit record will follow you your entire life and make all the difference when it comes to every major purchase you make, from your first car to your first house.  You need to start your credit history small in order to be prepared for these large purchases, and beginner credit cards are a great way to do this.  Beginner credit cards are designed to help people who are either building their credit for the first time or trying to rebuild their credit after a financial problem, like a bankruptcy.  Before you apply for one, there are a few important things you should know about beginner credit cards.

Read the Fine Print

When selecting the right credit card to build your credit record, you should be sure to read all the fine print.  It is pretty standard for all beginner credit cards to have a high interest rate.  This should not come as much of a surprise at all, since you do not yet have a credit record to support the bank giving you the low interest rates that people with good credit will qualify for.  But take heart, beginner credit cards are the best way to build up that kind of credit, and if you use them wisely and carefully you will soon be able to qualify for a better rate.

Low Credit Limit

Another thing you will notice about beginner credit cards is that they all have very low credit limits.  Many of them are $500 or less, and this is to prevent those who are new to using credit or may have a history of misusing it from digging themselves into a big hole of debt.  Again, with proper use of your credit card, you will eventually qualify for increases in your credit limit that will allow you to make major purchases as needed.

Additional Fees

What you should really be looking for in the fine print is any information on fees that you will be required to pay.  Many beginner credit cards have a large initial fee that will take up easily half of your available credit on those with the lowest limits.  There may also be an annual fee that you will be charged every year for the privilege of being extended credit, or even in some cases a monthly fee.  All of these fees can leave you with very little room for credit card purchases, but they are a very common occurrence on beginner credit cards.

Shop Around

There are plenty of options out there for beginner credit cards, and you should shop around in order to get the best possible interest rate and the lowest fees.  Talk to the bank where you have your checking account, as they might be willing to give you a better deal due to your history with them.  If not, check around with some of the companies that specialize in beginner credit cards.  While you are unlikely to find a great deal on this type of credit card, you can do a little better that some of the highest interest rates and huge fees some institutions will charge you.

Pay It Off Every Month

Remember that using beginner credit cards wisely is the best way to improve your credit rating and gain access to better rates and higher limits.  Be sure to pay off your balance in full each month and use the credit card only for needed purchases.  A good idea is to choose one small monthly bill to pay using that card and pay it off right away with cash.  This will show that you are capable of using credit wisely and help your credit rating and the confidence level that credit companies will have in you.

Beginner credit cards are a stepping stone towards more financial freedom and access to the credit you will need to make any major purchase.  If you need to build good credit, these are a great place to start.  Remember that these credit cards are aimed at people who don’t have a good credit history or have no credit history at all, so while the rates and fees may seem unfair at first, they are designed to protect credit card companies from major financial losses.

With careful use of beginner credit cards and smart financial decisions, you will soon be on your way to great credit and access to the best rates!

Photo courtesy of Andres Rueda.

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