I got my first credit card from one of those guys on campus with a folding table and free tshirts. Back then, they gave give credit to anyone who could fog a mirror. No income? No assets? No clue? No problem! The tshirt wasn’t even cool, it was for AT&T, and I got it as easily as my first beer. Nowadays, what the meltdown of our financial system and all, they actually have some requirements to pass before giving you a credit card. Crazy. So what’s a young consumer looking for fresh plastic to do?
Note: Neither juggling axes or credit card debt is particularly advisable for the novice. Credit cards are tools for managing your cash flow and should be used wisely, and treated with caution. Only use a credit card if you can pay it off in full every month, otherwise you’re practically paying someone else for your own money. That said…
If you are a student, the easiest way is to apply for a student credit card. There are several student-targeted credit cards available, such as the Citi mtvU credit card, that are familiar with the risks associated with extending credit to low-income students. Credit limits are often low, terms are typically average, and you’re much more likely to get accepted.
For a long time, having a steady job and decent credit seemed to be the only requirements for getting a card. Or even just one of them. Now, with credit cards companies getting choosier and choosier, you will likely need both to get your pick of the bunch.
If you don’t have much history, and have been rejected because of it, try a store credit card. Many department and mall stores offer credit cards. They often have very low limits, correspondingly low credit requirements (like $250 – $500), and offer an easy way for you to build up a history of being responsible with unsecured credit. After a year or so of using that card, you might become eligible for a much larger, more rewarding, unsecured card.
Piggyback To help build up your credit history and get better cards and terms, ask you parents if they will add you as an “authorized user” on one of their credit card accounts. Now you benefit by looking like you have a longer and, assuming your parents aren’t deadbeats, more positive credit history. You don’t actually get their credit card or access to their account, it just buffs up your credit score.
A secured card is your last resort. Secured cards require you to put down a cash collateral that then becomes your credit limit. Secured cards aren’t ideal but you will likely never be denied a secured credit card because it’s backed with your own money. Why would you get this over a debit card? Secured credit cards are reported to credit bureaus and can help improve your score, thus opening the door to unsecured credit cards (sometimes the issuer will be willing to convert the card for you). The best place to ask for a secured card is from a bank or credit union you already work with, you will likely be charged fees if you go with independent issuers. One gotcha to look out for, make sure the issuer of the secured credit card reports your usage to the bureaus (if they don’t… well that defeats the purpose).
Hey wait, aren’t credit cards evil? Why yes, they are. But a necessary one. If you ever hope to buy your own place or get a car loan, you need to start building a credit history. Getting a credit card is the best way to do that. Getting a credit card is also a great way to get in a cubic ton of debt and spend the rest of your life working it off like a drone. So play smart and don’t charge any more on it than you can pay off in a month. Going cash/debit only for most transactions, and only using credit cards when you want chargeback protection or have a temporary cashflow issue is a good way to go. Remember kids, debt is slavery!
Jim writes the blog Blueprint for Financial Prosperity.