Getting your first credit card

Credit cards are something that most young people will need to get at some time or another.  Although credit cards are a good way of smoothing the peaks and troughs of monthly income, if they are used carefully, with the growth of the internet as a way to shop they have become a vital financial tool for many people who are not that interested in using them as a way to borrow.

The problem that most young people have is that they tend to have no credit record.  A credit record is a document that lists a person’s use of credit.  Credit card companies like using credit records as they are one of the best ways of judging whether a borrower will repay money in the future.  This will mean that many of the best credit card offers are reserved for people with very good credit records, while even standard credit cards are not available to people with a bad credit record.

Having no credit record is almost as bad as having a poor credit record.  This is because the person has not established a track record of dealing with debt.  There is also a problem in that there may be an attempt to fraudulently obtain the credit.

There are specialist credit cards that are provided for students and other young adults.  These tend to have higher interest rates and annual fees, as well as lower credit limits.  However they are a good way to start establishing a credit record and they are a decent first card before moving on to more standard credit cards.  These cards will often be advertised as being available to students and to people without a credit record.

Co-signatory credit cards are credit cards are guaranteed not only by the main credit card holder but also by another adult, usually a parent.  In effect the person is borrowing the credit rating in order to start their own credit card.

Prepaid credit cards are also something that can be used for ordering goods on the internet.  However they rarely help towards establishing a credit record.

Store cards are often a first credit card with many people as they are often offered without the need for anything but the most cursory credit checks, and they tend to be offered with a discount when a good is being bought.  They tend to have quite a high interest rate.