Your first credit card can be the gateway to building your credit score – and will expand your financial options in the future.
Credit cards are needed for simple transactions like reserving a hotel room, buying concert tickets or booking a flight. But more importantly, you need a credit card to begin establishing a credit history. You’ll need to use your credit card responsibly to start building a strong credit history, as your credit score plays a big role when you’re seeking approval for important financial products in the future – like personal loans and mortgages.
Our pick for your first card
Purchase interest rate
Scotiabank SCENE Visa Card
Apply today and receive 2,500 bonus points when you spend your first $500 in the first 3 months of card membership.
- Purchase interest rate: 19.99%
- Cash advance rate: 22.99%
- Annual fee: $0
- Credit rating: Good
- Minimum income: $12,000
- Minimum age: Age of majority in province/territory of residence
Will you be using your credit card to make everyday purchases? Will your financial habits affect if you make timely payments or not? Do you need a credit card with a rewards program? Once you figure out what you’re looking for, you can apply for your first credit card.
Credit cards are a big responsibility. Here are some factors to consider:
- Job stability. Banks and financial institutions screen your qualifications before granting you a credit card, including your job’s stability, how long you’ve worked there and your salary.
- Credit history. If you have a previous credit history, banks will check on your standing in order to determine your credit limit and confirm that you’ll be able to handle repayments.
- Personal and financial information. Banks and financial institutions also require you to submit specific documents for your application. Unfortunately for people with no credit history, this can be somewhat challenging as many banks will not want to take a chance on a newcomer. If this is the case, consider starting off with a secured credit card to get your credit history rolling.
I’m a student.
Many credit card companies offer student credit cards. These cards usually come with low or no annual fees and have low credit limits to ensure you don’t overspend.
I don’t want to change banks.
Although it’s advisable to compare a range of credit cards, you won’t necessarily have to change banks, as your current bank may have a credit card that meets your needs and requirements. Plus, your bank already knows your financial picture, so they may be more likely to approve you for a credit card – even with no credit history.
I want to earn rewards.
If you frequently spend on gas, groceries and dining out, you could potentially apply for a rewards credit card. Earning points or cash back could help pay back any small annual fee you have to pay for the card. Keep in mind rewards cards tend to have stricter eligibility requirements, so you may not be approved for one if it’s your first credit card.
Choose from different types of credit cards based on your financial needs and spending habits. These are some of the main types of credit cards you may want to consider as a first credit card:
- Credit cards with rewards programs
- Credit cards for students
- No annual fee credit cards
- Low interest rate credit cards
Keep in mind that the features and fees of a specific type of credit card will differ between card providers.
Most first credit cards often establish your credit history – so it’s important to pay attention to a few things.
- Avoid overspending and always pay all of your credit card bills on time.
- Having a credit card for a long period of time is good for your credit history.
- Try to keep your spending low in relation to your credit limit.
- Banks often give newcomers higher interest rates, so be aware of this and the long-term cost of carrying a balance. Once you have established a good credit history, see if you’re eligible for an interest rate reduction – or shop around for a new card.
When it comes to personal finance, getting a credit card is often the biggest step toward financial independence. If you ever want to be able to apply for a personal loan, mortgage or a line of credit, you can do so much easier by applying for a credit card as your initial step. But remember, being responsible with it is the key to your future credit rating.
If you’re application is declined for your first credit card, don’t lose hope because you can identify why your credit card application was rejected and apply for a different card in a few months time.