Published on December 11th, 2014 | by William Charles8
Starter Credit Cards – Best Cards For People With No Credit History
If you’re young or an immigrant to America then chances are you’ve run into the chicken and egg problem when it comes to getting credit cards. The card issuers want to see you’ve got a history of using credit cards responsibly before giving you one, but you can’t build a history of using them responsibly without getting one in the first place.
The traditional wisdom has been to start with a secured credit card or similar product. The downside to do this is that these cards largely have high fees and low or no rewards program. Secured credit cards are really designed for people with a negative credit history (a history of using these cards irresponsibly, e.g failing to make payments on time). People with no credit history are much better off trying to get what I like to call a “starter” credit card. These typically have low limits and are designed for people with little or no credit history.
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Best Starter Credit Cards
Below is our list of the best starter credit cards, these cards are those which I think are best suited to those with little or no credit history. You’re not guaranteed approval, but in general these cards are much more likely to approve you if you don’t have any credit history. Remember you can also see what cards you’re pre-approved or pre-qualified for by going here. None of the cards in this list come with an annual fee, allowing you to keep the card open for as long as you like. The sign up bonuses often change, so make sure you read our reviews to see what they are currently.
Credit card issuers have special departments or teams that deal with applicants that have been denied but want the card issuer to reconsider. You can find a full list of phone numbers for the reconsideration department here. If this is your first reconsideration call, make sure you read our tips first. This can be an extremely effective way of getting your first credit card.
This card comes in at #2 and there is one main reason as to why. If Discover doesn’t approve you for the Discover it card, they’ll often give you the option to apply for the Discover it secured card. Most people will find that they are approved for the regular version of this card though, unless they have big derogatory items on their report such as bankruptcies.
Even though this is a starter card, the rewards program is actually pretty decent with 5% cash back in rotating categories and 1% cash back on all other purchases. This is another card that will give you a free FICO score.
AmEx Everyday Card
American Express created this card to cater to cardholders that don’t want to pay high annual fees and just want to use it for their everyday purchases. This card comes in third place for a couple of reasons.
- American Express backdates new cards to the year that you applied for your first card. This means that if you apply for another card in ten years time, it’ll show an opening date of this year. This will help to increase the average age of your accounts, which is a scoring influence on the FICO score.
- This will give you access to American Express sync offers which can be extremely profitable. Click here to view recent American Express sync offers.
- It has no annual fee and earns American Express membership rewards points. If you apply for other Membership Rewards cards in the future and you don’t want to pay the annual fee, you can effectively store them on this card until you’re ready to redeem or transfer them to one of the travel partners.
This card also earns 2x Membership rewards points on grocery store purchases in the US (limit of $6,000 in spending per year) and an additional 20% bonus on all points earned if you have more than 20 transactions per month. Find out some cheap ways of increasing the amount of transactions you have each month.
Chase’s other basic starter card is the Chase Slate, but that card is really more targeted to people with existing credit (which is why you always see balance transfer offers for that card). The Freedom can be a bit more difficult to get than the other cards listed here, which is naturally why it’s lower.
Building Your Credit Responsibly
I do not recommend applying for more than one of these cards at a time. It’s important that you understand how to build your credit in a slow and steady manner, here are a few rules to follow:
- Never make a purchase on a credit card unless you can pay for it in full. A common mistake people make when getting their first credit card is to make a lot of charges on it that they don’t have money to pay for. “This is great, I can buy all this stuff!” when their bill becomes due and they see the high interest rate they immediately regret their decisions. Credit card debt can be rehabilitating due to the high interest rates, only put charges on your card that you can afford to pay for.
- Stay slowly and build from there. If you don’t have any credit history and apply for twelve credit cards in one day, then chances are you won’t be approved for any of them. This makes it look like your under extreme financial stress, which is not appealing for lenders. Apply for one card, use it responsibly and then apply for another in six months or twelve months time.
- Keep your credit utilization low when applying for new cards. A high credit credit utilization (the amount of credit you’ve used divided by the amount of credit you have available) is also a sign of financial stress and as such it causes your credit score to drop. Before you apply for any more credit, make sure you pay off any credit card balance. Even if you pay in full every month, you might still have a high credit utilization due to the reporting date being different than your statement date.
- Educate yourself. Before making any financial decisions, you should be arming yourself with as much knowledge as possible. An informed consumer is a credit card issuers worst nightmare. Learn how the FICO score is calculated, always make sure you’re getting the highest sign up bonus and maximize your spend by getting different cards that earn at high rates in the categories you spend the most in.
Getting credit without credit history can be difficult, so I hope you find this list of starter credit cards useful. If you apply for any of these cards and don’t have a lot of credit history, then let us know if you get approved or denied in the comments. If you get denied, make sure you call the reconsideration line and see if you can’t change their name.
Also let us know if you don’t have any credit history and applied for a card not listed here and got approved. We will be adding more cards to this page over time, at the moment we have just listed the absolute highlights.
This post was a suggestion from ColinC on our post entitled “What’s A Blogpost Or Tool Which You Wish Existed But Doesn’t?”. Because we used his idea, he’ll receive a $5 Amazon gift card. Feel free to suggest your own topic idea over on that post and you could also win.