Used properly, credit cards can be a useful way to give yourself added financial freedom, cover large expenses, or plug the gap between an expense and your next wage payment without the need to resort to costly payday loans. They can also be a way for those with little or no credit history to build up their credit rating in a relatively simple and cost-effective way. However, if you have never had a credit card before it can be difficult to know which one to choose. The following are all things you may wish to consider in choosing your first card.
Specialist Credit Builder Cards
This type of card is well worth considering as a first credit card if you have little credit history. They are specifically designed for those with little or no past record as a borrower in order to build up a credit history and create a good rating. In other words, they are specifically aimed at those taking out a card for the first time. This means you have the best chance of getting accepted despite your lack of history, and are likely to receive a fairly good package for somebody who is, in the eyes of the lenders, an unknown quantity.
However, do not make the mistake of thinking that you will automatically fail to qualify for anything but a card that is specially designed for someone in your situation. It is still worth seeing whether you might be eligible for another card with slightly better terms, especially if you do have a little credit history with no particular bad marks. Be aware, though, that a declined application could form a bad point on your history. Some providers offer tools to help you check your eligibility without endangering your credit rating.
Cashback, Rewards and Incentives
Many cards offer incentives and rewards. These might take the form of cashback on purchases or a one-off gift upon taking out the card such as money, a gift voucher, or some desirable item. It can also be possible to obtain rewards for taking out a card from third parties. For example, it is possible to apply to many providers through cashback websites, earning cashback upon the approval of your application for a credit card. Be sure to look at rewards when shopping around. If two providers offer very similar packages but one offers a reward and the other doesn’t – or if one reward is simply more attractive than the other – it will probably seem like a no-brainer which one you choose.
The only thing to beware is letting an attractive reward tempt you towards a card that is otherwise not as good. This can sometimes be worthwhile, but you should be very sure that the reward will outweigh the drawbacks before you make this decision. There is no point accepting a cash reward or gift voucher, for example, if its value is likely to be wiped out by higher interest rates and charges.