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How to Choose a Credit Card for the First Time

Published June 26, 2024

8 min read

Key points about: choosing your first credit card

Make sure you understand your financial resources and future goals before you start applying for credit cards.
Each card is different, so it’s important to read the “fine print” and compare details like interest rates, introductory APR, annual fees, and cardmember rewards.
Some types of credit cards are well-suited to first-time credit users, such as secured cards and student cards.

Starting the journey to pick your first credit card is more than just an important step; it's the beginning of building a good credit history. For first-time credit users, knowing how to pick your first credit card is key because it shapes how lenders and financial institutions will view you later on. Making the right choice can set a strong financial foundation, opening doors to better loan and mortgage rates.

In this guide, we dive into the world of credit cards, providing you with tips and strategies on how to pick your first credit card, so you can make a decision that aligns with your financial goals and starts you on the path to achieving a strong credit score.

Considerations before choosing your first credit card

When you’re determining how to choose a credit card for the first time, your first impulse might be to start researching cards right away. However, before you begin comparing or applying for cards, it’s vital to take a step back and look at the bigger picture of your financial situation. Think about what your resources are, what types of expenses you have, what size budget you’re comfortable with, and what your short-term and long-term financial goals look like.

Whether you aim to build credit, earn rewards, or manage expenses efficiently, recognizing where you stand financially and what you aim to achieve sets the groundwork for a wise choice. By approaching the decision-making process with a clear idea of both your current situation and your future goals, you’ll be well-prepared to choose a card that fits your lifestyle and matches your preferences.

Assess your financial situation

Understanding your personal financial situation — especially how your income stacks up against your expenses — is crucial when considering adding a credit card to your financial toolkit. This understanding helps ensure that you can handle credit card payments and potentially avoid any risk of added financial stress.

A thorough review of your budget not only helps prevent the pile-up of debt but also aids in choosing the right credit card that matches your spending habits and financial goals. By keeping an eye on your cash flow, you can help avoid stretching your budget too thin and make a well-informed decision that supports your financial health and credit-building journey.

Identify your financial goals

Different credit cards are suited to different purposes. To choose the card that’s the best fit for you, consider your objectives and priorities. For example, if you want a card designed for building credit, a secured card might be a good fit. Or, if you’re a student, something like the Discover it^® Student Cash Back card could be a good fit. It’s also wise to compare the rewards different cards offer, consider what financing options are available, and think about whether you’ll be using the card for business or personal expenses.

Best credit cards for first-time applicants

Some types of credit cards have eligibility criteria or other features that make them ideal for first-time credit users. Here are a few examples:

Secured Credit Cards — Secured cards are ideal for people who want to build credit, and generally may not require applicants to have an established credit score. For example, The Discover it^® Secured Card can help you build credit with responsible use.¹
Student Credit Cards — Designed for college students, these cards usually have lower spending limits.
Rewards Credit Cards — These cards generally offer cash back rewards, travel miles, and other benefits.

Key features to look for in your first credit card

Knowing what to look for in a first credit card will help you make a choice that fits your budget and lifestyle. Pay careful attention to the terms and rates that the card offers, such as the annual interest rate, introductory APR, and what types of fees could apply. You should also evaluate the benefits and features offered, such as cash back rewards and fraud protection.

Annual percentage rate (APR)

APR stands for “annual percentage rate”. A credit card APR reflects the interest rate, or how much interest you’ll be charged if you don’t pay off your balance in full. Credit card APRs can range anywhere from around 17% to nearly 30%.

Some issuers offer a temporary 0% introductory APR for new cardmembers with certain cards. It’s important to compare the APR on different credit cards and know when the introductory period ends, since these factors affect your payments.

Credit card fees

Most credit cards come with various fees — some more expensive and numerous than others. Fees can add up fast, so it’s important for first-time credit card applicants to be aware of their cost. Common examples of credit card fees include:

Annual fees
Balance transfer fees
Cash advance fees
Foreign transaction fees
Late payment fees

Credit building potential

To build credit efficiently, be sure to choose a card issuer that reports your payments to all three of the major credit bureaus. When your credit card activity is reported to these bureaus, every timely payment contributes positively to your credit history, improving your creditworthiness over time. This is particularly important for those looking to make significant financial moves in the future, such as applying for a mortgage or a car loan, where a good credit score can lead to better interest rates and terms.

It’s also a good idea to look for an issuer that offers free tools for credit monitoring, like Discover’s Free Credit Scorecard. These tools allow you to keep a close eye on your credit score and report, helping you understand how your financial actions impact your credit over time.

Rewards and incentives

Credit card issuers offer various types of rewards and perks for cardmembers. Some common examples include travel points or airline miles, welcome bonuses for new cardmembers, and cash back rewards on assorted purchases. These rewards programs are designed to make your spending more rewarding, effectively giving you something back on every purchase you make.

Consider your financial habits and look for a card whose rewards will benefit you, like travel rewards if you fly frequently or cash back in your biggest spending categories. For example, if a significant portion of your budget goes towards groceries, it's wise to look for a credit card that offers higher reward rates for supermarket purchases. Or, if you travel often, a card that builds travel rewards or offers travel-related benefits would provide the most value. This thoughtful approach helps you choose a credit card that maximizes the benefits you receive based on where and how you spend your money, making every dollar spent work harder for you.

Did you know?

Some rewards credit cards offer rotating category rewards that let you earn a higher percentage of rewards on specific spending categories that change throughout the year. The Discover it^® Cash Back credit card lets you earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, you earn unlimited 1% cash back on all other purchases – automatically.

Learn More

Choosing your first credit card

It’s important to choose a card that not only fits your current financial situation but will also help you accomplish your goals for the future. It’s also important to understand the different options that are available to you, and how they fit together with your lifestyle and spending habits. Let’s review some tips on how to choose your first credit card.

Consider long-term value vs. short-term gains

When choosing a credit card, it's tempting to focus on the immediate benefits, such as 0% introductory APR offers and attractive sign-up bonuses. While these features can provide short-term value and savings, it's important to consider the long-term benefits and costs associated with the card. Understanding the card's interest rates after the introductory period, annual fees, and the rewards structure is essential. This ensures that the card continues to offer value beyond the initial perks and aligns with your ongoing financial needs and spending patterns.

How to compare credit cards effectively

The sheer variety of credit cards can be daunting for first-time applicants, but it’s never a good idea to choose a card at random. Instead, focus on cards that offer rewards you’ll use, features that will benefit you, and terms you feel comfortable with. If you’re feeling uncertain about where to begin, credit card comparison tools can provide a useful starting point.

Utilize credit card comparison tools

Credit card comparison tools streamline the card selection process by compiling all the crucial information you need to make a decision, such as user reviews, ratings, fees, and rewards into one easy-to-access location. This comparison allows you to quickly compare and contrast various cards, saving time and simplifying your decision. By offering a comprehensive overview at a glance, these tools help ensure you find a card that best matches your financial needs and goals without the need for extensive research.

Key takeaways for first-time credit card applicants

With so many options available — and so many differences between them — it’s vital to make informed decisions about which cards to apply for, especially when you’re new to the world of credit. Remember to evaluate key points like interest rates, fees, introductory APRs, sign-up bonuses, credit monitoring tools, and rewards for cardmembers. If you’re not sure where to start, a credit card comparison tool can help you get the ball rolling. And remember, by making informed choices and considering your spending habits, you can select a credit card that helps manage your finances and build a strong credit history.

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