What is the Right Start-Up Credit Card?
When you are looking for a start-up credit card, you are looking for not only a convenient payment method, but also a tool to help establish your credit. When you use your credit card responsibly, it can help with your credit history.
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The right start-up credit card option depends on where you are in your credit journey. Are you a student? Do you have some negative events on your credit history, and you want to rebuild your credit? By knowing what bucket you fall into, it can help you choose the right card for your needs.
First, Can You Get a Credit Card Without a Credit History?
Yes, you can, but the type of credit card varies. A good first step is checking your credit score and looking into your credit history to find out where you stand. When you’re just building credit for the first time, know that you don’t start with a credit score of zero, either — your score is calculated based on your credit activities, so with responsible use, you’ll slowly start to build a solid credit score. You may have a couple of credit activities on your report from payments such as rent (although this is rarely reported), or if you’ve been an authorized user of another person’s credit card.
Can Your Parents Help You?
If your credit history is empty, you might turn for help to people you’ve known all your life — your parents. Getting added to their credit card as an authorized user can help you be “found” by credit bureaus and, with responsible use, can help you when you decide to apply for a start-up credit card of your own.
Of course, it’s important to know that just like good behaviors are reported to the credit bureaus, so are irresponsible behaviors. Any negative activity on the account, such as missed payments, can be reported, which could hurt your credit score as an authorized user.
Are You a Full-Time College Student?
Many credit card companies issue credit cards designed especially for college students 18 years and older, and they don’t expect you to have an extensive credit history. A student credit card can help you get the hang of using credit cards, and they report repayment activity to the credit bureaus. Plus, some offer rewards for your spending. For Discover student cardmembers, you could earn rewards not only on everyday spending, but also a $20 cash back reward each school year your GPA is 3.0 or higher for up to five years after account opening.1
Keep in mind, however, that credit card companies cannot issue a card to those under the age of 21 unless they can demonstrate independent income or assets.
Store Cards May Be Easier to Get
A store card is another start-up credit card option. The reason? “Department store cards are relatively easy to get for individuals with poor or minimal credit,” says Credit Infocenter. “This is beneficial for consumers who need to establish credit, rebuild their credit, or improve their credit history.”
Keep in mind that store cards typically have lower credit limits and higher interest rates. On the other hand, if you frequently shop at a certain store, you may be able to reap some good rewards when using their store credit card. Just be sure to practice strong, responsible behaviors like paying on-time, every month, and paying off your full statement balance so you don’t carry debt month-to-month.
A Secured Credit Card Can Help
A secured credit card can be a very good way to begin establishing your credit.
A secured credit card is essentially a card with a security deposit, meaning you put down a security deposit for the card that essentially becomes your credit limit, up to the amount that the issuer can approve. With responsible use, some issuers may even review your account after a period of responsible use and may eventually “graduate” it to an unsecured credit card, which doesn’t require the deposit.
If you don’t think that a secured credit card can be one of the right start-up credit card options, then you’ve perhaps never heard about the Discover it® Secured Credit Card. This card offers cash back and benefits that are more typical for a good rewards card than a secured credit card, and Discover starts reviewing secured credit card accounts in less than a year of use to determine if it can be graduated to an unsecured card.
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Depending on your situation, you might benefit from a student credit card, a secured credit card, or even a store credit card. The most important part is exercising good habits no matter which card you use — pay your balance in full and on time every month to avoid interest on purchases and late fees.
1. Good Grades Rewards: Good Grade Reward only available to new cardmembers on or after 7/23/2015 who indicate on their application that they are currently enrolled in college, and whose accounts are current and remain open when the Good Grade Reward is requested. Students with a Discover it® or Discover it® chrome card who have a GPA of 3.0 or higher (or equivalent) during a School Year (September – August) may apply at Discover.com for a $20 Cashback Bonus (“Good Grade Reward”). One Good Grade Reward per School Year, per account, up to a maximum of five (5) consecutive years from the date your account is opened. Terms of Good Grade Reward Offer are subject to change.