How to get a credit card for the first time

Credit cards let you borrow money to buy something now and pay for it later – sometimes with added interest. They can be a useful tool, but taking out a credit card for the first time is not something to be entered into lightly. First, you need to consider whether getting a credit card is right for you. 

Reasons to get a credit card

There are a number of reasons why you might want to get a credit card, but it’s important to ensure your decision is based on sound reasoning. For instance, you shouldn’t get a card just to spend money you don’t have. You need to be certain that having a credit card won’t tempt you to overspend and that you can pay back any money you do spend.

Of course, credit cards can be useful. For instance, you can use it to:

• Spread the cost of a big purchase

• Delay paying for something you need to buy now until you have the money available

• Boost your credit score by showing lenders you can borrow money and pay it back reliably

• Earn rewards on some cards that give you cashback or discounts 

• Borrow for free with introductory deals offering 0% on purchases

• Use a card with no foreign usage fees to cut the cost of spending abroad 

What are the pros and cons of getting a credit card?

As with any financial product, credit cards have pros and cons that you should be familiar with before you take one out.

Pros

One of the big advantages of credit cards is that if you pay your monthly bill in full each month, you won’t pay any interest. In fact, you can get up to 56 days before interest is due. This is the maximum number of days possible between using your card and paying your credit card bill. 

You also benefit from added protection when you use your credit card to pay for something that costs more than £100 but no more than £30,000. This applies even if you don’t pay the full amount with your card. 

This protection is detailed under Section 75 of the Consumer Credit Act 1974. This law means your credit card company is jointly liable with the retailer if something goes wrong when you purchase something by card. For example, if a retailer goes bust before delivering your goods and you can’t get your money back, the credit card company will refund you instead.  

Cons

A downside of credit cards is that if you’re not disciplined with money, you could spend more than you can pay back and end up in debt. And if you’re already in debt, a credit card could make things worse. 

You can also build up debt if you only make the minimum payment shown on your credit card bill rather than clearing the whole balance. This is because you pay interest on the remaining balance. Over time, the money you owe can grow as more interest is added, eventually becoming an unmanageable debt. 

Not paying your bill or paying it late can also hurt your credit score and make it harder to get credit in the future.

There are also other drawbacks. For instance:

• Charges if you don’t pay your bill on time

• Fees if you use your card to withdraw cash (and pay interest on the amount from day one)

• Fees for certain transactions 

• High interest rates for borrowing once an introductory rate has ended

What type of credit card should you get?

If you decide a credit card is right for you, the next step is determining which type to get. Your choice of card may be limited if you don’t have a credit history yet, but choose the best one from the available options. Your decision should be based on what you want to use your credit card for and your spending habits. The five main types of credit cards are shown below:

1. 0% on purchases credit cards

These cards offer an introductory interest rate of 0% for up to 21 months. This means you can spread the cost of a purchase without paying any interest during the introductory period. However, you must pay off the money you owe by the time the introductory deal ends – if not, you’ll have to pay a high interest rate on the remaining balance.

2. Low-interest credit cards

This type of card lets you borrow at a relatively low interest rate. They’re worth choosing if you intend to borrow money beyond any introductory 0% deal.

3. Reward credit cards

As the name implies, reward cards let you earn cashback and other perks. They shouldn’t be used for borrowing as they have relatively high interest rates. As a result, you should only take one out if you know you can pay off your bills in full each month. It’s also worth noting that you have to pay an annual fee for some reward cards.

4. Balance transfer credit cards

These cards let you transfer an existing credit card balance onto them without paying interest during the introductory period. There’s usually a transfer fee for doing this. You won’t need one of these cards if you’ve never had a credit card before. 

5. Credit builder credit cards 

Designed for people who don’t have a credit history or who have a poor one, a credit builder card can help you boost your credit score by showing lenders that you are a reliable borrower. To do this, you must use the card and pay it off in full each month. These cards charge a high interest rate for borrowing.

How to apply for your first credit card

To be eligible to apply for a credit card, you need to be at least 18 years old and a UK resident. Some cards are only available to those with a regular income or a certain level of earnings.

You’ll usually need to provide the following information when you apply:

• Personal details

• Income, employment and monthly outgoings

• Addresses from the last two or three years

• Bank account details

Many credit card providers and comparison websites provide eligibility checkers. You can use these to see which cards you might be approved for before you apply. This is useful because applying for multiple credit cards over a short space of time can harm your credit score. By using an eligibility checker first, you can limit the number of applications you make. 

In a nutshell

You can make the most of the benefits credit cards have to offer if you:

• Ensure owning a credit card is right for you

• Choose the right one for your needs

• Ensure you’re in the best financial shape to apply for one

• Use the card sensibly when you get it

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