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Things to watch for when getting your first credit card

Monday, March 11, 2013

It's a lot tougher to get a credit card these days, especially if you're going for your first one. And many times, getting that first card can come with hefty fees if you're not careful.

College student Daniel Lehrman was rejected for the first two credit cards he applied for.

"They said I didn't have enough credit history at all, and they couldn't back me for a card," he said.

Consumer Reports money experts say that even if you are able to get a credit card when you have little or no credit history, the cards are often a bad deal.

"These can have huge start-up costs, big maintenance fees and giant interest rates," said Mandy Walker with Consumer Reports.

Take the Matrix card by Discover from Continental Finance. It has a $75 annual fee, plus a $12 monthly fee that kicks in after the first year.

And the First Premier Bank card has a super-high annual percentage rate -- a whopping 36 percent!

"One of the best options for a first-time cardholder is to get a secured card. It'll require a security deposit that's generally equal to your credit limit," Walker said.

The Capital One Secured MasterCard is better than many. It has an annual fee of $29, its APR is currently 22.9 percent and it has a low late fee of no more than $19.

"If you get a card and establish a good payment history for a year to a year and a half, you can then ask for another one with better terms."

Lehrman was finally accepted for a credit card, and he knows he has to use it carefully.

Consumer Reports says developing good habits with your first credit card can spare you a lifetime of financial grief. Make a point of paying off the balance every month. That way, you won't get buried in debt and end up paying oodles of money in interest charges.
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