There are many things to consider when applying for a new credit card and it can get pretty confusing. If you don’t currently have a credit card or even a credit score, you may not know where to start. It doesn’t help that there are so many options for getting credit, you may become overwhelmed with the choices. Most people apply for some sort of credit right after they turn 18, whether it’s a store credit card, a gas card, or just your standard everyday credit card. The best way to start is to start small, and try not to ahead of yourself.
Most people start with something simple to build their credit like a car loan, a student loan, or a gas card. You will of course have higher rates, but it will be better for you in the long run.
The first thing you should do is decide what type of credit you need. If you absolutely need the financial flexibility of a credit card look for something that offers instant or pre-approval. You may want to avoid credit providers like American Express, or Discover and look for something more flexible like CapitalOne or a credit union. If you are looking for something simple that will help you build your credit score, you may want to consider a gas card or a store credit card. Those are easy to monitor and you are going to spend that money anyhow. Most people spend over $100 a month on gas using cash or their debit account. Putting those purchases on a gas card and paying it off immediately will help to improve your credit score.
Another safe option for building credit is a secured credit card. A secured credit card requires you put a deposit down to provide you with your initial credit line. If you put down $1500, you will have $1500 available in credit. Secured credit cards are a great way for people with a low credit score to get approved for a card and start building their score.
Whatever you choose, be sure to monitor your spending and the time it takes you to pay back. A good rule of thumb is never spend more than 30% of your available credit and always make your payments on time. This will let creditors know you are trustworthy and don’t overextend you finances to more than you can afford. You want to avoid spending your entire available credit in one month as this can look bad on your credit report. This can lower your score and even bump you down to the next category on the credit score chart.