Editorial Policy

How to get (and manage) that first card

Eva Norlyk Smith Ph.D

September 22, 2014

QDear Eva,

I'm 19 years old and moving out on my own soon. I feel like I should have a credit card, but I'm not sure where to start. Do you have ideas on how I can get my first card? Thanks. —Colin

AHi Colin,

When venturing out to get your first card, there are two ways to go: Start completely on your own or, if you have a family member who is willing to help out, get added as an authorized user on an existing credit card account and get a card issued in your name on that account.Ask Eva

This strategy is also referred to as piggybacking, because the credit record associated with that card will also show up on the authorized user's credit history. For example, if you are an authorize user on a card account that has a five-year history of credit use with timely payments, that five-year positive credit record will now show up on your credit report as well. That will give your credit a boost and will make it easier for you to qualify for a card of your own after a year or two.

There are several caveats to this approach. First, a family member or friend would have to be willing to add you as an authorized user on one of his or her cards. But because the account holder is ultimately responsible for the bill, this is not always an easy sell. Whether this approach is even an option will depend on your relationship with the account holder and the degree of mutual trust you have developed, particularly when it comes to financial matters.

The other issue that you need to be aware of is that piggybacking only works in your favor if the cardholder pays his or her bills on time. It can be hard to know if the person you want to share credit with is a responsible bill payer. You can access free credit reports for the three major credit bureaus at AnnualCreditReport.com, but only the report owner can access the information — there are detailed questions that only the owner can answer, for this reason.

In short, if you aren't confident that none of the cautions above would apply to you, you're better off looking for ways to get a credit card on your own.

Your best bet? Go online and apply for a credit card for people with limited or no credit. (Or, if you're a college student, apply for a student credit card.) As you look through the card offers, stay clear of the offers for prepaid cards. Here, you simply load money from your bank account on to a card to use; these cards offer the convenience of credit cards, but they do not come with a credit line and therefore do not help you build credit.

If the card issuer you've chosen declines your application, it may instead offer you a secured credit card. With such a card, you get a line of credit secured by an amount deposited by you before the card is issued. For example, a $500 deposit will give you a $500 line of credit. While this may seem like a prepaid card, it is different in the borrowing and repayment activity that is reported to the credit bureaus. That's the only way you will build your credit so you can eventually graduate to a traditional credit card.

Save up so you can make the deposit needed, and higher amounts are better, so you get a decent line of credit to start out with. In addition, when it comes to secured cards, there are some bad apples in the barrel that charge pretty high fees, so look for cards that charge less than $50 in fees a year.

Use the secured card regularly for a year or two, and be sure to pay the bill in full every month. That will build the credit management habits you will need going forward, and will also boost your credit history. After a year or two, you should be ready to apply for a regular bank credit card, so you can shift away from the secured card and get back the money you deposited.

As you can tell, building the credit history you need to qualify for your own line of credit doesn't happen overnight. But it's an important step toward financial independence, so you're smart starting out sooner rather than later. Good luck!

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