First Credit Card: Everything You Need To Know

Getting your first credit card can be an exciting financial milestone, but it's important to know what you're getting into.

When used smartly, credit cards can be powerful tools to help with your finances, but they also come with risks. With a dizzying array of cards to choose from, not to mention terms that may be unfamiliar, getting your first credit card can be overwhelming.

The good news is that we've broken down every element of how credit cards work: their benefits, risks, how to apply, and how to manage credit effectively.

Whether you're a college student looking to build credit history, a young professional managing new monthly expenses, or a newcomer in the country keen to learn more about UK banking, our guide can help you choose the best credit card for you.

A credit card is a payment tool issued by financial institutions that allows you to borrow funds to pay for purchases and bills or, in some cases, withdraw cash. You must then pay off the amount owed at a specified later date.

In contrast to debit cards, which draw directly from the funds in your bank account, a credit card offers access to a line of credit that you must eventually pay back. The amount available to you depends on your set credit limit.

Each month, you'll receive a statement that lists what you've spent, the total amount owed, and the minimum payment due. You’re always advised to pay your balance off in full by the due date to avoid being charged interest. If you’re unable to do that, interest will accrue on the remaining balance. This rate of interest differs by card. Additionally, if you miss the minimum payment, you’ll likely incur penalties, which may affect your credit score.

Once you've successfully applied for a credit card, the lender will send it out in the post. Once activated, you can use your card to pay for goods, services, bills, or withdraw cash. The credit card issuer will pay the merchant on your behalf, and you'll repay the lender later.

Your credit limit is the maximum amount you can spend on your card, which will be set by the lender following a successful application. You're advised not to max this limit as this can affect your credit score.

The billing cycle is typically 28-31 days, when you'll receive a statement that outlines the minimum amount owed and the due date. Any balance unpaid after this date will begin accruing interest known as the annual percentage rate, or APR.

When used wisely, there are many benefits to enjoy from a credit card. A positive payment record improves your credit score, and some cards even offer rewards like cashback, travel points, or discounts.

While spending beyond your means is never advised, credit cards can offer access to emergency funds in unexpected situations. There are also additional security benefits, such as purchase protection, which can offer reassurance when paying for high-value items.

Given the wide range of credit cards on the market, narrowing your choice to one can be tricky. Before applying, consider the following factors to find the best card for your needs:

To qualify for your first credit card, you'll need to meet the following criteria:

If you're going to apply for a credit card, it’s important to understand the different types available so you can find one that fits your lifestyle and financial goals.

The application process is most commonly done online, but some issuers will accept submissions in a bank branch or over the phone.

Online applications usually take 15-20 minutes. Before you begin, make sure you pass the eligibility criteria on age, income, and residential status. Then, be prepared to submit your personal details, employment and income details, and bank account information.

Many applications are approved or declined within minutes of completing the form. Others may take longer, and the lender may request additional documentation. If accepted, you'll typically receive your card within 10 working days.

Ensure you're managing your credit card effectively by taking smart steps. Rule number one: never miss a payment. This can seriously hurt your credit score and result in late charges. Set up a direct debit to take the minimum amount every month. Always pay your balance in full if you can. This way, you'll avoid interest entirely.

Carefully check your statements when they arrive each month, as errors, while rare, do happen. Avoid cash advances, as they tend to come with high fees and interest rates. And lastly, don't attempt to open too many accounts at once, as each application can affect your credit score. If you’re struggling with managing your credit card or no longer have a need for it, you may want to consider how to cancel a credit card.

It's not unusual for a credit card application to be rejected, and it can be due to a number of factors. Lenders may be spooked by limited credit history or low income, while any previous late payments or defaults will do you few favours. Lenders are also reluctant if they discover that you have a high debt-to-income ratio, especially if you have other credit cards.

Whatever you do, don't panic by applying for more credit cards elsewhere. Too many recent applications can also affect your chances, so pause and consider other options. Check your credit report for any gremlins, and try to gradually build credit with a secured card, student loan, or a mobile phone plan.

If you use your card responsibly, as outlined above, you should start seeing improvements to your credit score within 3 months.

Lenders like to know you have the means to make your payments. However, this doesn't need to be a full-time job. A student loan, family allowance, or earnings from a part-time job may satisfy the bank.

If you miss a minimum payment, you'll likely be stung with a late fee, interest charges, and a potential downgrade on your credit score. Avoid this at all costs!