A credit card can have a key role to play when it comes to functioning effectively as a consumer. But if this is your first time applying for a credit card, what do you need to know and how to get the best one?
How are early credit cards different?
When you apply for a credit card or any other type of credit, the lender will search your credit report (a kind of financial “CV” showing how well you’ve managed your borrowing in the past) to determine if this lend you, and under what conditions.
If you’ve never had a credit card before, you will have little or no credit history. In turn, this means that the lender has little or no information to go on. And, no matter how fair it seems, you will be considered high risk.
This usually results in less competitive offers, for example, lower credit limits and higher APRs (annual percentage rates).
So when you get your first credit card, it’s even more important to shop around for the best deal possible.
What are the best first credit cards?
We researched the ‘first credit card’ market (June 2021) and found the following offers.
Keep in mind, however, that you cannot benefit from the cards you see. And since the APRs are representative (that is, offered to 51% of successful applicants), you may be offered a higher one.
1. Tesco Foundation credit card
TAEG representative: 27.5% (variable)
Initial credit limit: Â£ 200 to Â£ 1,500
If you’re new to credit, that appropriately named Tesco credit card might start to get you in the race.
You can keep up to date with any improvement in your credit score by using the card responsibly with Tesco Bank’s CreditView tool, while monitoring what you spend from its app.
Monthly repayments start at just Â£ 25, although you still have to pay back what you owe in full, while optional credit limits are available if you manage the card well.
Although there are no upfront 0% benefits, you can collect Tesco Clubcard points wherever you use the card, as well as the usual points in store.
2. Amazon Classic Mastercard
TAEG representative: 29.9% (variable)
Initial credit limit: From Â£ 500
If you have an account with Amazon, you can apply for this Amazon credit card (actually provided by the lender, NewDay).
It promises an initial credit limit of at least Â£ 500 and the ability to improve your credit rating, as long as you make your payments on time and stay within your allotted credit limit.
Proper card management may also result in an upgrade to the Amazon Platinum Mastercard, which will allow you to collect Amazon Reward points.
New cardholders receive a Â£ 20 Amazon Gift Card which will be loaded to your Amazon account or when you activate your credit card.
The deal also includes 0% on purchases for three months. But, as always, you should only spend what you can afford to pay back.
3. Barclays Forward Credit Card
TAEG representative: 33.9% (variable)
Initial credit limit: Â£ 50 to Â£ 1,200
As long as you have an annual income of at least Â£ 3,000 a year, this Barclays card could be a good bet for a first credit card.
While the initial representative APR stands at 33.9% (variable), it decreases by 3% in the first year in exchange for all of your on-time repayments, while in the second year you will be rewarded with an additional 2 reduction. % of the APR.
However, if you pay off your balance in full each month, which is the best way to handle these (and all of the other) credit cards, you won’t pay any interest.
You’ll also receive SMS and email alerts to help keep your spending under control.
The Forward Card comes with 0% on purchases for three months. However, only spend what you can afford to repay.
4. Classic Capital One credit card
TAEG representative: 34.9% (variable)
Initial credit limit: Â£ 200 to Â£ 1,500
While the Capital One Classic credit card does not come with any 0% period or incentives, the card is more flexible than many on the criteria for acceptance.
You will be entitled to two credit limit increases, as long as you make your payments on time and stay within your credit limit. However, keep in mind that these are optional, so you have the right to refuse.
Managed responsibly, this could provide a good first entry into the credit card market.
What is our methodology?
We ordered the first credit cards by APR representative, initial benefits and credit limits. However, the APRs are representative, which means that you may be offered a higher one.
Using an eligibility checker to apply for your first credit card means you can see your chances of being accepted without risking harm to your credit rating if you are denied.
Finally, while all the information was correct at June 2021, note that offers may change.
Frequently Asked Questions
What do i need to apply for a first credit card?
You will need to be at least 18 years old and reside in the UK. Some cards also come with a minimum income amount.
What are the advantages of a first credit card?
In addition to being a means of spending in an emergency, a credit card offers protection under Section 75 of the Consumer Credit Act.
This means that the card provider is jointly responsible with the retailer for a full refund if there is a problem with a purchase of goods or services costing over Â£ 100 and up to Â£ 30,000.
A first credit card can also be used as a tool to build your credit score. A good credit score will unlock access to the best credit deals in the future, from cell phone contracts to mortgages.
What are the disadvantages of a first credit card?
If the card is on hand, you might be tempted to spend more than you can afford to repay each month. This will incur high interest charges as well as fees if you are late in your payments. It will also have a negative impact on your credit score, rather than improving it like the cards are designed to do.
What about student credit cards?
If you go to college and open a student bank account, you may be offered a credit card alongside. In this scenario, this will likely be your first credit card.
Student credit cards come with fairly typical representative APRs (varying between 18% and 19%), but a low credit limit.
In addition to emergency spending, student credit cards are a good way to build your credit score, allowing you to qualify for better credit cards (like those offering rewards or 0% on spending) and other types of borrowing in the future.
What happens when I apply for a credit card?
Start with an eligibility checker who will show you the probability of being accepted for a first credit card before you apply. This approach protects your credit rating if your application is unsuccessful.
Once you are accepted with a card that suits you, you will be given a credit limit. This is the absolute maximum you can spend on the card. You will receive the card by post with your PIN code in a separate envelope.
You must then sign and activate the card before you can spend on it.
How do I get the most out of my first credit card?
First, only spend what you can afford to pay off, which means your balance is cleared every month. You can do this by setting up a direct debit that will automatically reimburse what you spend on the card.
If you can’t afford to pay the entire balance, try paying more than the minimum required by the card provider. This amount will be exceptionally low because it is the best way to continue borrowing and paying regular interest.
Try not to be swayed by rewards and other incentives, as the APR will be very likely to erase the benefits.
Avoid using your card for cash withdrawals. This will incur a fee of around 3% of the amount withdrawn and you will pay interest from the day of withdrawal, even if you pay off your balance in full that month.
And never go over your credit limit.
Can I change my mind?
You will have a 14-day cooling-off period during which you can inform the supplier that you want to cancel the contract. If you have already spent on the card, you will have 30 days to clear the balance.