Getting your first credit card can be as exciting as getting your driver's license. A credit card gives you a certain amount of financial freedom, but it comes with an equal amount of responsibility. Young adults who apply for a credit card for the first time should be familiar with how credit cards work and the consequences for not paying the bill on time, carrying a balance and going over the credit limit. Because it can be hard for young adults to qualify for their first credit card, student credit cards are an option worth exploring if you're still in school.
Research credit cards for which you think you might be eligible. Make a chart on paper or in a spreadsheet and record each card's introductory period interest rate and annual fee and ongoing interest rate and annual fee to compare them. Select the card with the lowest annual fee first and the lowest interest rate second if you plan to pay off your balance each month. Read the fine print to understand any other charges that might not be disclosed in the marketing material for the card.
Apply to One at a Time
Apply for the most favorable credit card and wait for a response. If you're rejected, follow the instructions in the rejection notice to get a free copy of your credit report, if you have one. Apply for the next card on your list and wait for a response from that company. Don't apply to several cards simultaneously, because that could jeopardize your chances of being approved for any card.
Consider Secured if Rejected
If you are repeatedly rejected, rather than selecting a credit card with a high interest rate and a high annual fee, consider a secured or prepaid credit card. You give the credit card company a deposit, which becomes your credit limit. If you don't pay your bill, the credit card company takes part or all of your deposit. Prospective creditors can't tell if a card is secured or unsecured. If you use a secured card and always pay your bill on time for at least a year, it's possible that you can then be approved for a regular credit card.
Pay Your Balance Every Month
After you get your credit card, you can use it to pay for purchases and to establish a credit history, as long as you set aside the money to pay off your balance in full each month. Don't use your card to buy something you can't pay for right now. Instead, set a savings goal and save until you have enough money to make the purchase.
Always Pay on Time
Always pay your credit card bill before the due date. Paying on time is the single most beneficial action you can take to improve your credit score. It also keeps you from paying finance charges and late fees, which can be substantial. If you think you might forget to pay your bill, schedule an automatic payment that's higher than what a typical minimum monthly payment would be. Then, when you remember, make a second payment that covers the remaining balance and estimated finance charges for the month.
Steve McDonnell's experience running businesses and launching companies complements his technical expertise in information, technology and human resources. He earned a degree in computer science from Dartmouth College, served on the WorldatWork editorial board, blogged for the Spotfire Business Intelligence blog and has published books and book chapters for International Human Resource Information Management and Westlaw.