In this brief blog, we are going to discuss getting your first credit card. Your first credit card is very important for your financial wellbeing and this guide helps you pick it.

To explain how to get your first credit card we will discuss what a credit card is, the different jargons associated with a credit card and how to manage your first credit card so you avoid getting into credit card debt.

What are credit cards?💳😮

Credit cards are just like loans but unlike loans, credit cards provide credit for an indefinite time. This is also known as revolving credit.

This means the offer of credit is automatically renewed(offered) when all previously used credit is repaid.

Your first credit card and every subsequent one will give you access to a fixed line of credit known as your credit limit. You can use this one as you like but there may be some fees and charges based on how you use it.

When you spend on your first credit card and any subsequent credit card after you accrue what is known as your credit card balance. This is the amount you owe the credit card company and the amount you have spent.

At the end of the month, your credit card provider will ask you to make a monthly minimum payment which will be a percentage of your outstanding credit card balance.

By making this minimum balance repayment on your credit card you are keeping up to date on your account but if you make only the credit card minimum payment balance and not the full credit card statement then your credit card balance will be carried over from one month to another( from one statement period to another) and this is when you are charged the credit card APR on your first credit card. 

If you repay your first credit card balance in full each month then you wont have to pay any interest.

We will now dive into a few associated terms you will find with your first credit card.

What are credit card limits?🌡

A credit card limit is a maximum amount your credit card provider has offered and provided to you on your credit card. On your first credit card, you will be told what your credit card limit is. You shouldn’t spend more than this amount (as some credit card providers allow you to) because you will get charged a fee for spending more than your credit limit.

Your credit card provider may also restrict your ability to use your credit card if you go over your credit limit.

The credit limit you will get on your first credit card will be based on your credit score and income.

If you have a bad credit score or no credit history at all then you may get a low credit limit of around £300 on your first credit card. If you have a much higher credit score then you may get a much higher credit limit.

When you apply for your first credit card the credit card provider will let you know how much of a credit limit they will offer you.

What determines your credit limit on your first credit card?

Credit card providers have different internal scoring systems to work out what credit limit they will offer you. 

This will include :

Your previous repayment history on credit accounts listed on your credit file

Your income

Your monthly expenses

Your credit score

The amount of available credit you currently have access to

Your current debts

How to find your credit limit?

You can find your credit limit by:

Calling your credit card provider

Looking at your credit agreement

Looking at the key facts information you received when you opened your first credit card

Logging into your mobile app or web app

Looking at your credit card statement

What happens if you go over your credit limit?⛔

If you go over your credit limit on your first credit card then the credit card provider will likely charge you a fee for going over your credit limit. Some credit card providers may also restrict how much they offer you and reduce your credit limit. The credit card provider may also restrict your use of your credit card until you pay the balance on your credit card to put it below your approved credit limit.

Some credit providers will increase your APR(interest rate) even if you are on a promotional rate. You should be given 60 days to accept or reject any increase in APR and clear your outstanding balance. 

If you go over your credit limit on your first credit card then this may be reported to the credit bureau and this could damage your credit score.

If you constantly go over your available credit limit then your credit card provider may close your account and require you to pay any outstanding balance in a short time frame.

How to increase your credit card limit🙌🏻✔

If you have just got your first credit card and the credit limit you were approved for doesn’t seem sufficient then this is how you can increase your credit limit.

You should only really ask for a credit limit increase if you have used your credit card for more than 3 months and have always paid back your credit card balance in full. It will also be helpful if you use your credit card often, almost like your main card. 

You should also check to see if your credit score has increased since you got your first credit card.

If this is you, you can then go on and ask your credit card provider for a credit limit increase on your first credit card.  Your credit card provider will likely check your credit score and history before issuing you with a credit limit increase. If your credit provider rejects you for a credit limit increase then this may damage your credit score.

You should always ask for a credit limit pre-approval via a soft credit check which only you can see on your credit file and doesn’t damage your credit score.

You can increase your credit card limit by:

Applying for an increase online

Calling your credit card provider over the phone or

By writing to your credit card provider

Your credit card provider can also change your credit limit without asking you.

They could do this if:

Your spending behaviour is unusual

You missed a minimum payment

Your credit score has fallen significantly

You go over your credit limit repeatedly

Tip: The Golden rule is to spend no more than 30% of your available credit limit as this will boost your credit score.

What is a credit card minimum payment?🗝😮

A credit card minimum payment is the minimum repayment a credit card provider will require you to pay based on the outstanding balance you had on your previous credit card statement period (usually the previous month). 

When you get your first credit card you will come across this term a lot and if you are still confused about it then you should call your credit card provider and ask them how they calculate their minimum payment requirements.

The minimum payment is actually a fixed percentage but as you use your credit card this number moves in line with how much of your balance you have actually spent.

E.g You credit card provider might want your credit card outstanding balance (The amount you owe on your credit card) at the end of the month to be no more than 10%. This means if you have used all your available credit for that month your minimum payment is 90%.

Assuming your credit limit is: £1000

And you spent: £900

Your minimum payment will be: £900

If you spent £500, your minimum payment will be: £400

Essentially your minimum payment is whatever you have to pay to bring your account up to the maximum outstanding balance allowed by your credit card provider before they will impose a charge(In the case above this is £100 or 10% of the available credit limit). 

The credit card provider will allow you to carry over a certain maximum balance from one month to the other without any charge on your first credit card.

If you do not pay your first credit card in full but pay only the minimum payment then your credit card provider will charge you interest on your outstanding balance.

What happens if I don’t make the minimum payment on my first credit card?🌷💧

If you don’t make the minimum payment on your first credit card for a given month your credit card provider will charge you a fee and charge you interest on the outstanding balance. This will continue until you make the minimum payment required by your credit card provider.

If you fail to make the minimum payment required on your first credit card, then the credit card provider will report this to the credit bureaus as a missed credit repayment. This will be a negative mark on your credit report and will push your credit score down.

Paying only the minimum payment on your credit card is the fastest way to accumulate debt. This is because you will begin to accrue interest rate and charges on the outstanding balance. This will continue for every month you have an outstanding balance.

Paying off your balance in full each month is the best way to go about things but if you find yourself struggling then considering a 0% Balance transfer card might just save you a considerable amount of money in interest rate charges and fees.

What are credit card fees and charges?👀🕶

Credit card fees and charges may be levied upon you if you do not stick to the terms of your credit agreement. These fees can be fixed amounts or interest rate charges.

The charges include:

Interest rate charges on purchases:

Your first credit card will charge you interest on any purchases you make if you do not clear your statement balance in full each month.

Cash advance charges:

A cash advance is when you use your first credit card in any way that may be seen as using it in place of physical cash or cash upfront. This means if you gamble with it, if you withdraw money at the ATM.

Your credit card provider will charge you interest for the cash advance which is usually higher than the percentage charged on purchases and may even charge you further interest known as cash handling fee.

Foreign transaction charges:

If you use your first credit card in any other currency other than the one specified in your credit agreement your credit card provider may charge you a foreign transaction fee.

Late payment charges:

If you fail to make your monthly minimum credit card payment on its due date then your credit card provider may charge you a late payment fee.

Balance transfer fees:

Your current card provider may charge you a fee for moving your balance to another credit card.

Annual credit card fee:

Some credit card providers have annual credit card fees. You should look out for this when getting your first credit card. You can pay your annual credit card fee  in full or it will be added to your monthly outstanding balance.

How do I get my first credit card with no credit?👀

Credit cards are usually not available for people with no credit but more likely for people with bad credit and upwards. 

You should first check to see if you have an established credit file in the UK. If you do not have an existing credit file then this might be because you haven’t been in the UK that long or you haven’t taken steps to build credit. 

It takes between 6 months to 36 months to build credit and this is dependent on the credit bureau.

To get your first credit card you should look to build credit by following the below steps:

Get on the electoral roll

Open a bank account

Get a credit builder card

Get a secured credit card

Avoid applying for too many credit applications

Avoid getting rejected for credit

Keep your credit utilization to below 30%

Once you have an existing credit file then getting your first credit card should be easier. 

Credit cards are readily available for people with bad credit scores. These cards are more commonly known as credit builder cards. They come with low credit limits and high APRs. A few months of good credit behaviour( such as repaying your credit card on time) with these credit builder cards could see your credit score increase and put you in a more favourable position to get better credit cards.

Which credit card is best for first-time users?

There are various credit cards which are good for first-time users. 

CapitalOne and Vanquis bank are known to offer credit cards for people with bad credit or looking to get their first credit card.

You shouldn’t apply blindly for credit cards but rather you should sign up to a credit card eligibility platform to see what credit cards you are eligible for.

If you have a Uk bank account you should ask your bank if you would be eligible for their credit card as some UK banks will be more willing to offer you a credit card even though you do not have a great credit score as they can judge your eligibility from your transaction data.

What to consider when getting your first credit card?

When looking to get your first credit card these are the things you should consider:

Eligibility

Each card issuer will have its own lending criteria that you will need to meet before they will provide you with an offer of credit. 

There are now credit card eligibility checker platforms which let you know which credit cards you are eligible for and which you have a high probability of getting on application. 

Most credit card providers now have their own credit card eligibility systems in place which will let you know if you will be approved for a credit card with them or not. These tools use a soft credit check to pull your credit file data and hence does not leave any footprints which are visible to the public or harm your credit score.

You should avoid applying for a credit card if you are not confident you will be accepted as rejections for credit could damage your credit score and history. This may then affect your ability to get further credit in the future.

Interest rates

When getting a credit card, the interest rates on the credit card are a very important factor and you should always lookout for the APR figure. 

The interest rates on the credit card are the rates that will be charged on any outstanding credit card balance which you carry over from one month to another.

If you pay your credit card balance in full each month then you will not have any interest to pay.

Credit cards typically come with up to 55 interest-free days on purchases if you don’t carry a balance month-to-month.

Credit limits

You should look at the credit Credit limits when choosing a credit card provider as the credit card limits will determine how much you can spend on your credit card. Most credit card providers may offer you a credit limit increase if you can show good credit behaviour over a few months.

Rewards and perks

Credit card providers offer various rewards and perks but usually, these are reserved for applicants with high credit scores.

Fees

Some credit card providers will have annual fees on their credit cards but these are usually for credit cards with high credit card limits and lots of rewards or perks.

You should always check what fees are attached to your credit card. These can include annual or monthly account fees, cash advance (withdrawing cash using the card) fees, overseas transaction fees and others.

How to get your first credit card

To get your first credit card, check to see if you have a credit score first.

If you are unsure of what your credit score is then you should check your credit score from the four credit bureaus in the UK: Experian, Crediva, Equifax and Transunion.

Some of these credit bureaus may charge you a fee to view your credit report so what you can alternatively do is request a statutory credit report which is a free credit report which each credit bureau must provide to you upon you requesting it.

Alternatively, you can also use credit score services such as Checkmyfile and clearscore to check your credit report.

Once you have done this you should then check on a credit card eligibility platform to see what credit cards you are eligible for and then apply for your first credit card.

In this brief blog, we talked about getting your first credit card. If you have any questions or comments please let us know below.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.