If you're trying to establish credit, you might not be able to get a credit card with a $10,000 or $100,000 limit from the get-go. Then again, you might not need that much credit to start building your credit file and establishing yourself as a good customer for lenders. Lenders that specialize in working with people with credit challenges frequently offer low-limit cards that can help you establish credit so that you can, if you wish, get higher limits in the future.
If you're a college student, some credit card issuers have cards that are aimed at you. While the terms vary from issuer to issuer, many have no annual fees and offer reasonable terms that make it affordable for you to build credit. For example, some college student Visa cards also offer credit limits as high as $2,000, as of 2013. To qualify for some cards, you might need to attend a specific school, live in a specific area or have a pre-existing relationship with the issuing bank.
When a student card isn't an option for you, you can still get an unsecured credit card. One place to start could be a local credit union, since credit unions can be more flexible in lending to newer borrowers. Other unsecured cards targeted at people with little or no credit can be hit or miss. Some have onerous fees that end up swallowing up most or all of your entire credit limit. Reading the fine print before you accept any offers can help to save you from making an expensive mistake.
Secured cards are credit cards that are backed up by a separate bank account. To open a secured card, you typically put an amount equal to your credit limit in an account at the issuing bank. As long as you pay your credit card on time, your money sits in the bank, untouched. If you don't pay, the bank can tap the account to pay your card's balance. When you choose a secured card that reports to the credit bureaus, it helps you build credit like any other credit card. Since the issuer isn't taking very much risk, these cards are relatively easy to qualify for, as well. It's even possible that you could end up spending the same or less for a secured card than you do for a high-fee unsecured card.
Leveraging a Low Limit
Regardless of the limit on your credit card, using the limit you have wisely can help you to build your credit. One way to help a strong credit score is to pay your credit card on time, every month. Another strategy is to only use a small portion of your credit card's limit. As reported in the "Chicago Tribune," Eleanor Blayney from the Certified Financial Planner Board of Standards recommends keeping your utilization between 10 and 30 percent. This means that, if you have a $500 limit, you charge enough to keep your balance between $50 and $150 per month. You don't have to carry a balance, either. You can pay it off every month and show that you are responsible with your credit, which could lead to higher limits in the future.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.