Don’t be Afraid to Apply for Your First Credit Card

By: burgundy bug

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Eagle perched upon the cliff faces of Lake Billy Chinook

Source: Eagle at Lake Billy Chinook | Penelope Peru Photography P³

Your first credit card is the initial notch in the belt of building a lifetime of credit. While caution should be exercised, credit cards aren’t so evil. You have to establish credit in order to get a good mortgage, rent or lease a car, and apply for loans.

You have to have debt in order to start building credit. In fact, this is exactly how our founding fathers established credit after the American Revolution.

In the fall of 1789, one of our founding fathers, Alexander Hamilton, incurred a national debt of $19,608.81 with two bank loans as the first step in building credit for our new country, according to an article published by US News & World Report.

Hamilton also assumed the state debts accumulated during the Revolutionary war.

Shortly thereafter, Hamilton proposed a Bank of the United States inspired by the Bank of England. The Bank of the United States would act as a fiscal agent of our government, supply our paper currency, as well as our government loans.

Hamilton’s plan couldn’t have been more successful. Within just a few years, U.S. bonds were performing far beyond their expectations in European markets.

Why? By going into debt, the United States demonstrated as a nation that we could consistently make payments on time, proving that our country was a secure investment.

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Another eagle perched on a cliff at Lake Billy Chinook

Source: Eagle at Lake Billy Chinook 02| Penelope Peru Photography P³

Luckily, it’s not hard to rack up some debt in the contemporary land of the free, home of the brave, and heart of corporate consumerism.

How to Establish Credit

Establishing credit isn’t exactly as simple as accumulating debt and paying it off. You have to have what is known as a revolving debt.

Revolving debt is essentially a monthly balance on your credit card. For example, if you charge $60 dollars and pay off $20 every month, you have established a revolving debt. This exactly what creditors are looking for.

Why is Revolving Debt Important?

Creditors and lenders are looking for certain behavioral patterns that indicate an individual is responsible enough to handle debt.

Responsibly handling debt isn’t just a matter of paying it off. It is the practice of consistently making payments over time.

If you charge $60 and pay it off right away, you’re not proving that you can commit to a line of credit. You’re simply reinforcing that you had the $60 you needed all along.

Whether you’re applying for your first credit card or you’re looking to reestablish credit, a fuel card is a wonderful way to establishing revolving debt.

What is a Fuel Card?

A fuel card, also known as a gas card, is a credit card for the sole purpose of purchasing fuel at gas stations.

There are a number of major gas stations that offer fuel cards, such as Exxon and Sunoco. Many convenience stores, such as 7-Eleven and Wawa also offer fuel cards.

Why Should I Apply for a Fuel Card?

Think about it. What will you always need, regardless of your age or circumstances? Gas! So long as you drive, you will have to fuel your car.

Hell, even if you don’t drive, I’m sure you probably give your friends or family gas money for giving you a ride here or there.

Gas cards come with their own perks, often saving you money per gallon and what not. However, the best perk is the foundation they are laying for the future of your credit.

How do I Establish Credit with a Fuel Card?

Establishing credit with a fuel card is easy! All you have to do is charge a few gallons to your card and pay it off in increments on time every month. This proves that you are reliable and responsible.

You don’t have to charge every fuel up to your card. After all, you don’t want to get in too over your head. When you are first establishing (or reestablishing) credit, your monthly balance should remain within a reasonable amount that you could still afford to pay out of pocket.

Is a Fuel Card my Only Option?

No, but they are universally recommended as these creditors are generally not looking for an extensive credit history. If you have no prior history, or you are looking to improve a fair score, you will have an easier time getting approved for a fuel card than a Visa or retail credit card.

Fuel cards also have low interest rates, and possibly no interest for the first 12 months.

However, a student card is also an option if you are in college and applying for your first credit card.

What is a Student Credit Card?

A student credit card works just like a regular credit card, however they are designed to help young individuals establish credit for the first time in their life.

Student credit cards are offered by a slue of major banks including Bank of America, Capital One, Discover, and USAA.

Unlike traditional Visa cards, student credit cards often have little or no perks. Student credit cards also generally have lower credit limits and higher interest rates.

Why Should I Apply for a Student Credit Card?

Although student credit cards typically don’t come with the bells and whistles of a traditional credit card, college students will have a ridiculously easy time getting approved whether they’ve established prior credit or not.

Student credit cards also aren’t looking for the same level of income. These financial institutions have purposely designed these cards for students. They understand that you probably won’t be able to juggle going to both school and work full-time.

All they are looking for is some form of income to prove you can afford to make monthly payments. It can be part-time pay, freelance, etc…

Even if you are afraid you won’t get approved for your first credit card due to only working part-time, don’t let it hold you back. Both gas cards and student credit cards are not looking for full-time income.

Applying for your first credit card doesn’t have to be scary. In fact, most banks offer an online tool to see if you are preapproved for any of their cards before you submit an application.

These preapproval tools allow you to see whether you qualify for a line of credit without impacting your credit score. Your credit score will only be affected if you submit an application and it is denied.

If you are denied, don’t panic. These derogatory marks lowering your score should go away in a year.

Once you’ve established credit, you can continue to build it by applying for a retail card or a regular credit card.

The higher your score is, the easier it will be to apply for a loans, mortgages, as well as rent or lease a car.

Establishing good credit takes time. The sooner you start, the better.

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An eagle flying over Lake Billy Chinook

Source: Eagle at Lake Billy Chinook| Penelope Peru Photography P³

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