If you have little or no credit, getting your first credit card is a great way to start building it. Here’s how to find the right starter card for you.
There’s a first for everything, and that includes launching your credit history with your first credit card. Fortunately, there are credit cards designed specifically for people with no credit. It will be important, though, to pursue a credit card account you’re likely to qualify for and that matches your lifestyle.
“Getting your first credit card can be a great tool for establishing and building your credit profile,” says Krista Phillips, executive vice president, head of branded cards and marketing, for Wells Fargo. However, with no experience in credit, all the credit card choices may confuse you. Check out our picks of the best credit cards to build credit.
Capital One Platinum Secured Credit Card: Best for no credit history
Why we picked it: The best and safest way to learn about credit is to open a secured credit card. Your security deposit often becomes your initial credit limit, so the amount you put down becomes the amount you can charge on the card each month. One of the best secured cards out there is the Capital One Platinum Credit Card. Depending on your credit score, the security deposit could be as low as $49, and your initial credit limit could go up to $1,000.
To some, $1,000 may not sound like a lot, but it’s important to keep it low for beginners to discourage overspending. The card has a high APR – 29.74% variable – which in itself might persuade you not to carry over your balances. That’s good for you because paying your credit card bills on time and in full, every month, will help you improve your credit steadily.
- No annual fee, foreign transaction fee or penalty APR
- Low required security deposit ($49-$200)
- Consideration for higher credit line after six on-time, monthly payments
- High APR
- Strict approval odds
Who should apply: New cardholders with absolutely no credit history and no idea how credit works should get this card. People with bad credit looking to improve it will also like this card. The lack of bells and whistles will keep you on track to pay your bills on time and in full.
Who should skip: If you have established good credit habits but have run into some bad luck previously that resulted in a low credit score, you can probably skip this one.
Discover it Secured Credit Card: Best secured card with some rewards
Why we picked it: Perhaps you like the idea of a secured card but wish you could earn some rewards on your purchases. Then you don’t need to look further than the Discover it® Secured Credit Card. Not only is it a secured card with a max security deposit of $2,500, but it also provides cash back rewards. Specifically, you’ll get 2% cash back at gas stations and restaurants (up to $1,000 in purchases per quarter) and 1% cash back on other purchases.
People like the card because the minimum security deposit is only $200 (compared to the $300 of some other secured cards). Plus, Discover will review your account monthly after seven months to determine if you may graduate to an unsecured card. At the end of your first year, it’ll also match all the cash back you earned from your first year of card ownership.
- No annual fee
- 2% cash back at gas stations and restaurants (up to $1,000 in purchases per quarter)
- Cashback Match
- Free FICO score every month
- High APR (25.24% variable)
Who should apply: Potential cardholders who no credit or bad credit will love this card because they can improve their credit while earning cash back on everyday purchases. Those who have some funds to put down for a deposit will also like this pick.
Who should skip: If you know the rewards will easily tempt you into overspending, there are other cards to consider. Anyone who thinks they are disciplined enough to pay their bills on time might opt for an unsecured card instead.
Petal 2 “Cash Back, No Fees” Visa Credit Card: Best for flat-rate cash back
Why we picked it: Geared toward those with no credit, the Petal® 2 "Cash Back, No Fees" Visa® Credit Card offers a wide credit limit from $300 to $10,000. That $10,000 max is certainly higher than most starter cards, so be careful not to get carried away by buying more things on credit than you can afford.
The flat-rate cash back on this card is quite good as well – 1% cash back on eligible purchases and up to 1.5% cash back on eligible purchases after you make 12 on-time monthly payments. Other select merchants may give you even more cash back. It may sound unspectacular, but the flat-rate cash back earns more than you think, and you’ll increase your credit score while paying your bills regularly.
- 1% cash back on eligible purchases (up to 1.5%)
- No annual fee
- Roadside dispatch
- Money-management app
- APR may be high (15.24%-29.24% variable)
- Limited redemption options
Who should apply: Anyone with no credit history but a reliable income should apply. Also, if you want the flexibility of an unsecured card and seek to earn cash back, you’ll like this card.
Who should skip: If that 1% cash back on all purchases sounds awfully attractive and a recipe for disaster, sit this card out. Also, those with bad credit should probably go for a secured card instead. Cardholders with reliable payment history who’d like to earn a bit more rewards can also continue shopping around.
Discover it Student Cash Back: Best for students building credit
Why we picked it: One of the best student credit cards you really can’t go wrong with is the Discover it® Student Cash Back. It comes with no annual fee and hefty rewards – 5% cash back on rotating quarterly bonus categories (up to $1,500 per quarter, then 1%) and 1% cash back on other purchases. Discover will also match your cash back at the end of your first year.
Other than that, the card offers a short 0% intro APR on new purchases for six months (15.24% to 24.24% variable thereafter). The Discover it Student Cash Back is great for students looking to build credit while they begin earning money, perhaps for the first time. The good news is that Discover releases its cash back calendar all at once so that you can plan your purchases ahead of time.
- 5% cash back on rotating categories (up to $1,500 per quarter, then 1%)
- No annual fee
- No foreign transaction fee
- 0% intro APR for six months on new purchases (15.24%-24.24% variable thereafter)
- Only for students
- Enrollment required each quarter to begin earning 5% cash back
Who should apply: Students (who are at least over 18) and just beginning to earn an income (even your part-time job at the campus coffee shop counts) should apply. Young adults who want to build credit without sacrificing rewards will love this card.
Who should skip: Unfortunately, if you’re a young adult but not a student, you cannot apply. Also, if the idea of keeping track of rotating categories sounds like too much work, you should steer clear.
Comparing the best credit cards to build credit
|Card||Secured or unsecured||Rewards||APR|
|Capital One Platinum Secured Credit Card||Secured||N/A||29.74% variable|
|Discover it® Secured Credit Card||Secured||25.24% variable|
|Petal® 2 "Cash Back, No Fees" Visa® Credit Card||Unsecured||15.24%-29.24% variable|
|Discover it® Student Cash Back||Unsecured||15.24%-24.24% variable|
How to choose the best credit card to build credit
Each of the major issuers offers a wide variety of credit cards, some with more than a dozen on the menu. Smaller financial institutions, such as community banks, credit unions, online lenders and retailers also offer credit cards.
With such an array, deciding on the best starter credit card can be confusing. Here are the questions you need to ask yourself to find the card to start building your credit.
- Do you have any credit history? Even with no credit card, perhaps you have an auto loan or a student loan, with your name as either the primary or the cosigner. If so, the lender has been sending your activity to three major credit bureaus, TransUnion, Equifax and Experian. Check your credit report for free through AnnualCreditReport.com.
- What is your credit score? If you have a loan to your name, you must have a credit score. There are several ways to get your credit score, including buying your FICO score (the most commonly used score) from myFICO or getting a free score from Experian. If you have nothing to report, you won’t have a credit score, so your acceptance will depend on other factors like income and collateral.
- Do you prefer a secured or unsecured card? Of the cards on this list, some are secured, and some are unsecured. Most credit cards are unsecured, and they do offer greater flexibility. However, do not be deceived – there is no shame in starting with a secured card. It’s a safer way to learn about credit, ensuring you don’t overspend.
- Are you a student? If you’re a student enrolled in an educational institution, you should definitely go for a student credit card. It’s a no brainer. Student cards are designed for young adults with no credit history, and they offer solid rewards and often charge no annual fee.
How to use your first card to build credit
Whichever card you begin with, use it carefully to build your credit. “It’s important to establish healthy credit card habits from the get-go,” says Phillips. Mistakes will end up on your credit report and hurt your credit scores just as you’re trying to increase them.
For a FICO score, the two most important factors are payment history and credit utilization. Given that, follow the tips below to keep your score healthy:
- Pay on time. Charge your card at least once a month so information can appear on your credit report. At the end of the billing cycle you will receive a statement including the due date for your payment. Pay before that date to avoid a late fee. If you are more than one cycle behind, a late payment will appear on your credit report, which can really damage your credit score.
- Mind the credit limit. It’s best to charge only what you can afford to repay in full because you won’t acquire debt or be charged interest. If you do want to use the card to pay for something in increments, try to keep the balance is under 30% of the credit line to ensure a healthy credit utilization ratio.
- Keep the first account open and active. The longer you have it, the better for your credit history and scores. Even after graduating to a different card or adding an additional one, keep your first credit card active to help with your credit utilization (the more unused credit you have to your name, the better).
- Apply for new accounts prudently. You do not want to dilute the length of credit history by adding unnecessary new credit cards to the one that you have had for a while. You also don’t want to give lenders the impression that you’re desperate for money, so don’t apply for many loans and credit cards in a short span of time.
Your first card will help you build your credit, and when your scores are above the 750 mark, the world of credit opens up to you. Credit card introductory 0% APRs and valuable sign-up bonuses may be attractive. And the best cash back cards will allow you to earn money as you charge. Or, maybe you want a travel card that enables you to rack up points and miles so you can fly and stay at hotels for free. It all begins with your very first credit card. so choose wisely.