Your First Credit Card: How to Choose It, How to Use It

A credit card is like a short-term loan you dip into every time you swipe. Using it smartly can build your credit history along the way—and a good credit history means better offers from lenders for things like car loans and mortgages down the road.

The card you choose for your first credit card could help build the foundation for your lifelong credit journey. Once you’ve got the card, you can build credit. The best way to build credit is by paying on time, paying in full, and keeping it simple. 

First, though, you want the best credit card possible. Here's how to choose the right first card.

How to Choose Your First Credit Card

Choosing a good first credit card generally comes down to three main characteristics:

• No annual fees. Annual fees might be worth it later, when you're getting perks and rewards. For now, it should be easy enough to avoid them.

• Reports to all three major credit bureaus. Equifax, Experian, and Transunion show lenders your credit information. You want accurate information across all three. That way, regardless of which ones your future lenders check, you’ll be credited for good spending habits.

• Eligible for beginner borrowers. Fancy cards with lots of bells and whistles are usually aimed at people with well-established credit histories. Stick with cards aimed at people who are building credit so you aren't hit with denied applications right out of the gate.

The quickest way to narrow down your options is to eliminate all credit cards that don’t meet this criteria. Many popular credit cards will fail this checklist.

First Credit Card Types

You need credit to build credit—it’s a catch-22. Without credit, you’re what’s called credit invisible. Lenders use credit history to figure out how likely you are to pay back money you borrow. Without that history, lenders assume you're a high risk from the start.

On the other hand, lenders also know you have to start somewhere. There are plenty of credit cards aimed at people just getting started with credit. Getting approved for your first card starts with choose one intended for people building credit:

• Unsecured starter cards. These are regular unsecured credit cards, meaning they don't require any kind of deposit or collateral. They're also not flashy; think few or no rewards or perks. These cards are basic credit cards designed to help you access credit and build credit history.

• Student credit cards. These are also unsecured, but they're specifically aimed at students in college or post-secondary school. Student cards can be a great option since most have no annual fee and many offer basic purchase rewards.

• Secured credit cards. If you don't qualify for an unsecured card, a secured card could be the best bet. Secured cards require a refundable cash deposit that typically sets your credit limit. Otherwise, they're used like normal credit cards. Many have no annual fee and a few even offer purchase rewards. After six months or so of on-time payments, some issuers might graduate your card to an unsecured card automatically.

Cards for new borrowers don’t offer you the best rewards or sign-up bonuses. This isn’t a red flag. It’s the whole point—you’re much more likely to be approved for barebones stuff now, while your credit is new. As you make timely payments, your scores should rise, and you'll eventually qualify for those fancy travel or rewards cards all over social media.

How to Use Your First Credit Card

Pay on time, pay in full, and keep it simple. It’s the credit card version of brushing your teeth every day. Not complicated, but consistency is everything.

Payment history is the number one factor in your credit scores, so the quickest way to damage your credit is to make a late payment. It's smart to pay your balance in full every month at least a few days before the due date.

Paying only the minimum payments? That can be okay occasionally, but carrying a balance is how you get interest charges. As interest builds, it costs you more to pay the bills. Using a big portion of your credit limit could also hurt your credit score until you pay it back down.

Experienced credit users often know a few of these tricks that can make your first credit card easy if you use them, too. 

Set up autopay

Autopay makes your monthly credit card payments automatic. Set it up by logging into your credit card app or website. Just make sure you keep track of your spending so your autopay doesn't overdraft your bank account.

Check your transactions and card statements

Use your banking app or log into the issuer's website regularly to check up on your transactions. Make sure you recognize every purchase and the amounts are right. Dispute anything that looks like fraud.

It's also good to look at your overall purchasing trends and totals. Maybe you spent more than you thought on hobbies or went over budget on dining last month. Spotting the early warning signs of overspending may help curb bad habits before they lead to credit card debt.

Default to cash until you build credit discipline

Building credit doesn’t take much. A monthly $5 yogurt purchase on a card that you pay in full and on time is enough to start building credit. 

It’s tempting to lean hard on credit card rewards, but it could be a really high-risk, low-reward situation if you're not disciplined about spending. Rewards are small, especially for first cards, and interest fees could easily eat those rewards up—and then some.

Start small until you're certain you can keep your credit card use under control. A good way to think of it is to treat your credit card like a debit card. Only put purchases on your credit card if you already have the cash to pay for it.

When Your First Credit Card Isn’t Perfect

This is your first credit card—but it's probably not your forever credit card. Your credit needs will change as your life changes. You might keep your first credit card for a while, or you might close the card after a year or two to open something better suited to your lifestyle.

Focus on a first credit card that's easy to get, has no fee, and will let you build your credit with smart card use. Pay it in full and on time every month, and your credit should grow as you do.