Picking your first credit card? Follow these four key tips to find the best one for you

Digital News Video Producer

Starter credit cards can help first-time borrowers or those rebuilding after a financial setback establish credit history, but high interest rates and hidden fees can make them costly mistakes if not chosen carefully.

A strong credit history can affect major milestones like buying a car, renting an apartment, or even setting up utilities. Without one, borrowers may face higher interest rates, larger deposits, loan denials or the need for a cosigner.

Starter credit cards can be a useful way to build credit, and they generally come in four types.

Secured credit cards

Secured credit cards require a refundable security deposit that usually sets your spending limit, making them easier to qualify for.

Unsecured credit cards

Unsecured credit cards don’t require a deposit, but they can be harder to qualify for and often require a strong credit history. Borrowers with limited or poor credit may face higher interest rates and fees to offset the lender’s risk.

Student credit cards

Student credit cards are designed for college students who are new to credit. They don’t require a security deposit and typically don’t charge an annual fee. These kinds of cards typically have smaller credit limits and lower credit score requirements.

Hybrid debit-credit cards

Hybrid debit-credit cards typically limit spending to the funds in your linked account, so you can’t carry a balance or accrue interest charges. These cards generally don’t require a credit check to qualify and many don’t charge annual or monthly fees.

When choosing your starter card

To choose the right starter card, keep four key factors in mind:

• Look for low or no annual fees to minimize costs.
• Check the card’s interest rate, as starter cards typically carry higher annual percentage rates (APRs).
• Review rewards and perks, such as cash back on everyday purchases like groceries or dining. While rewards shouldn’t be the top priority while building up credit, they can be a helpful bonus.
• Make sure the card reports to all three credit bureaus: Equifax, Experian and TransUnion, to effectively build credit.

Overall, payment history is the biggest influence on your credit score. Always pay off your credit card on time to maintain a positive credit history. Set up auto-payments or reminders to pay on time.

Try to keep your balances low compared with your total credit limit. The Consumer Financial Protection Bureau says experts recommend using no more than 30 percent of your total credit limit. You don’t need to carry a balance to build a good credit score.

If you find suspected errors on your credit reports, you can dispute them with the credit reporting company or companies. You can also submit a complaint with the CFPB.

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