Why you might need a credit card
Before we cover how you can get a credit card, it’s worthwhile thinking about the reasons you might want one.
When it comes to getting your first credit card, keep in mind that while it gives you flexibility, it’s also a big responsibility.
Credit cards can be a useful tool to help you manage your money and there can be benefits to using credit cards for spending and borrowing in the short term. However, it’s important to know how to use a credit card to avoid being stung by high charges.
What are the advantages and disadvantages of credit cards?
There are several benefits that a credit card can bring, as long as you only spend what you can ultimately afford to pay back. These include:
Spreading the cost of items over time
Building a credit history or improving your credit score
Earning rewards or perks such as cashback or air miles
Purchase protection on items if the seller goes bankrupt
However, there are several disadvantages to credit cards to keep in mind:
· It can be easier to spend more than you can afford
· Missed payments will damage your credit score
· Managing multiple credit cards can become difficult
· Utilising too much available credit can concern lenders
How does a credit card work?
‘Credit’ is money you borrow, whether it’s through a credit card, loan or overdraft.
When you apply for a credit card, the lender runs a credit check on you to see how risky they think you are as a borrower.
If they approve you for a credit card, they’ll give you a credit limit. Your credit limit is a set amount of money you can access to pay for goods or services.
You pay back the money you borrow back each month, either in part or in full, with interest added if you have an ongoing balance. There’s a minimum amount you’ll have to pay, but it’s best to pay off the whole balance because then you don’t pay interest.
Do I need a credit card to build a credit score?
If it’s your first credit card or the first time you’ve ever borrowed money, you’re unlikely to have a credit record yet.
That means banks and lenders will see you as a high-risk borrower. That’s because there’s no evidence showing what kind of borrower you are. This might limit the number of credit cards you’re offered, and the amount of credit you can get.
You’ll need to use your first credit card sensibly and regularly to build up your credit rating.
A better credit rating will come in handy when you need to borrow more money in the future, for something bigger like a mortgage or car.
But even if you are a first-time borrower with no credit rating, there are still options available to you. By learning about how to get a credit card, UK borrowers will find the application process simple and stress-free.
How to get a credit card for the first time
The tips and information below will be helpful if you’re thinking of getting your first credit card. Find out how to get a credit card and what to look for when choosing one.
Who can apply for a credit card?
You’ll need to be at least 18 years old to apply for a credit card. But double-check because some cards do have a higher minimum age.
Most providers will only let you apply for their credit cards if you:
· Live in the UK
· Are employed
· Earn more than a certain amount, such as £7,500 a year.
But there’s another important step borrowers should know about. To make sure you get accepted for your first credit card, UK borrowers can start laying the groundwork well in advance.
The key is to make sure you're in the best possible financial shape before you apply. This will maximise your chance of being accepted for the first credit card you choose.
How to improve your chance of being accepted
There are a few simple steps you can take to increase your chances of being accepted for a credit card. These should be the first steps you take before you look further into how to get a credit card.
Registering to vote: Getting on the electoral roll provides proof of address, which can boost your credit score
Getting a job: Even if you get a part-time job, a regular income will show lenders that you're able to repay credit. If you’re not working, you might struggle to get credit.
Opening a bank account: Managing a current account can help you improve your chances of being accepted. By setting up direct debits and putting away savings, you’re showing lenders that you're financially responsible.
Pay bills on time: If you can show you’ve been repaying bills on time for at least six months, lenders will see this as proof of financial responsibility. It might help convince them that you can be trusted to pay back the credit.
A guide to choosing your first credit card
There are several different credit card types. Each is best suited to a particular kind of borrowing and choosing the right credit card to suit your needs is important.
You might be looking for one with low interest to help you pay off current debts. Or perhaps you want one with rewards that suit your lifestyle.
If you’re a first-time borrower looking for advice on how to get a credit card, then a credit builder card might be a good option for you.
Credit builder cards
If this is going to be your first credit card, you’re most likely to be approved for a credit builder card.
These make a great first credit card, UK wide. They’re also good for people with poor credit who are looking to improve their credit rating.
Credit builder cards typically have low credit limits, generally between £100 and £250. They also charge higher-than-usual interest rates, ranging from 24% to 50% or even higher.
As you consistently spend and repay your credit card, you'll create a record of a responsible borrower. Once you have a long enough credit history you may be able to get another type of credit card.
How to get a credit card that isn’t a credit builder card
A credit builder card is a stepping stone to getting one of these other types of cards. Although you might not be able to get any of these for your very first credit card, you might be able to once you’ve had a credit builder card for a while.
First focus on how to get a credit card, then work on managing it responsibly. Once you’ve done that, you should be able to progress to one of these types of cards:
0% on purchases: This means you won't pay interest on what you spend on your card for a fixed period.
0% on balance transfers: If you had another credit card with a balance charging you an APR, you could switch it to a 0% deal to cut out interest.
0% on money transfers: This lets you transfer most of the card balance to your current account. There’s usually a transfer charge for this.
Air miles: This type of card gives you air miles for spending a certain amount on your credit card.
Rewards: You can find rewards like cashback, giving you a percentage back on what you spend. For example, this could be 0.5%.
What to think about when applying for your first credit card
When you compare credit cards, it's important to consider a few key points. This will help you to work out which is the right card for you, and which offers the best value.
The interest charged on your credit card is the cost of borrowing money from the lender. When comparing credit cards, look out for the 'Representative APR'.
This is the rate offered to at least 51% of customers who are offered that card. It’s not necessarily the rate you’ll be offered, as it’s based on your financial circumstances and credit history. So, you could be offered a higher rate than the one advertised.
Some cards often come with lower, or even 0% introductory interest rates that last for a few months.
After that, they revert to the standard variable rate. While these can be useful for spreading the cost of purchases, make sure you pay off your balance before the introductory rate ends.
This is the maximum amount you’ll be able to borrow on your credit card. Like the APR, your credit limit also depends on your credit history and finances.
As a first-time borrower, you may not be offered a high limit. But remember, if you always pay off your balance on time, the lender may offer to increase your limit. If they don’t offer, you can ask for it to be increased.
It's also important to be aware of any extra fees you could be charged. These could be late payment fees, foreign transaction fees, or cash withdrawal fees.
Managing your first credit card
Before you start using your first credit card, keep in mind that you should aim to clear the full credit card balance each month.
That way, you can avoid paying any interest and still be able to take advantage of the card’s benefits, including building your credit score.
Where possible, aim to set up a direct debit payment to clear the full balance each month. This will avoid the need to manually pay off the credit card balance and reduce the risk of missing any payments.
How to apply for your first credit card
You can apply for the credit card you’ve chosen online, by phone, by post or in person. Before you apply for a credit card, you can use an eligibility checker to see your chances of acceptance for the card.
The simplest, quickest way is to apply online. You just have to complete an application form on the provider's website. You might be approved within minutes that way.
Most credit card providers ask you to share the following information:
Name and address
Date of birth
Employment status and income
If your application gets declined
Whatever you do, don’t apply again for the same card. Most providers automatically reject you if you re-apply within six months.
Here’s how to get accepted next time you apply. Building your credit history, time your application well and clean up your finances, and you’ll be a more attractive borrower.
You can ask the lender why they declined your application, but they don’t have to tell you.
Alternatives to credit cards
If your application is declined or you decide against getting a credit card, there are alternative options to consider, including:
Using a debit card
Getting a prepaid debit card
Utilising your overdraft facility (be aware of the charges that may apply)
Applying for a short-term loan
Generally, first-time credit card applicants receive small credit limits. A credit limit of $500 to $1,000 is average for a first credit card, but it may be higher if you have, say, a history of on-time car payments on your credit file.How much can you get for a first time credit card? ›
Generally, first-time credit card applicants receive small credit limits. A credit limit of $500 to $1,000 is average for a first credit card, but it may be higher if you have, say, a history of on-time car payments on your credit file.How does first credit card payment work? ›
Your first credit card payment is usually due 21-25 days after the end of the first billing cycle. A billing cycle lasts about a month from when you open your credit card. You can find the exact due date, the balance owed, as well as the minimum payment due on your monthly account statement.How do you use a credit card for the first time? ›
- Try to keep your balance below 30 percent of your available credit limit.
- Paying on time and more than the minimum can pay off.
- Learn how to spot and prevent fraud by regularly checking your account and credit report.
Invented in 1950, the Diners Club card is known as the first modern-day credit card. The idea came from Frank McNamara, a businessman who'd forgotten his wallet while out to dinner in New York. He and his business partner Ralph Schneider would soon invent the Diners Club card as a way to pay without carrying cash.Is $1 500 credit limit good? ›
A $1,500 credit limit is good if you have fair to good credit, as it is well above the lowest limits on the market but still far below the highest. The average credit card limit overall is around $13,000. You typically need good or excellent credit, a high income and little to no existing debt to get a limit that high.What is the minimum payment on a credit card with $2000? ›
What is the minimum payment on a $2,000 credit card balance? The minimum payment on a $2,000 credit card balance is at least $20, plus any fees, interest, and past-due amounts, if applicable.How long does it take for available credit after payment? ›
The payment won't be reflected in the available credit until it posts. Payments made through the card issuer's website or mobile app during business hours should post in one day or less, while a mailed check will obviously take longer to reach the card issuer.How is credit card money paid? ›
Credit card companies make the bulk of their money from three things: interest, fees charged to cardholders, and transaction fees paid by businesses that accept credit cards. Use credit cards wisely, and you can minimize the amount of money that credit card companies make off of you.What is paid first before the balance on a credit card? ›
Anything you pay over the minimum amount due will generally be applied to your highest-interest balances first.
- step 1: call your credit card company.
- step 2: request for a fund transfer.
- step 3: confirm the amount you want to transfer to the bank account.
- step 4: provide the bank account number and other details required.
- step 5: follow the prompts to complete the transaction.
Enter your card number, name, the expiry date of the card, and the CVV number (the three-digit number on the back of your card). Sometimes, you may be asked for the billing address too.How do you spend your credit card money? ›
- Make your payments on time. Your payment history is one of the major factors that influences your credit. ...
- Pay your credit card bill in full and on time each month. ...
- Buy only what you can afford to pay for with cash. ...
- Stay well below your credit limit.
Get a Credit Card with No Cash Advance Fees
For example, the Axis Bank Reserve Credit Card has no cash advance fee. If you have any such credit card, you can withdraw cash without worrying about the applicable charges. However, you should still keep the interest rate in mind.
Credit card debt today
A total of 35 percent of Americans carry credit card debt from month to month, according to a January 2023 Bankrate survey of 2,458 U.S. adults— an increase of 6 percent from 2022.
The Diner's Club credit card
The first example of the credit card as we know it today is often credited to a man named Frank McNamara and his business partner Ralph Schneider, who created the “Diner's Club” in 1949. As the story goes, Frank McNamara was dining at Major's Cabin Grill restaurant in New York City.
|Age Group||Good Credit Limit|
|Gen Z (18-24)||$9,000|
|Gen X (40-55)||$34,000|
|Baby Boomers (56-74)||$39,000|
Is a $10,000 credit limit good? Yes a $10,000 credit limit is good for a credit card. Most credit card offers have much lower minimum credit limits than that, since $10,000 credit limits are generally for people with excellent credit scores and high income.How much should I use at the $2000 credit limit? ›
According to the Consumer Financial Protection Bureau, experts recommend keeping your credit utilization below 30% of your available credit. So if your only line of credit is a credit card with a $2,000 limit, that would mean keeping your balance below $600.What kind of credit limit can I expect? ›
In general, credit limits tend to run around $2,000 to $10,000 per card — although many credit cards for people with bad credit offer lower credit limits in exchange for the opportunity to rebuild your credit score.