No credit? No problem. And that’s not just some commercial tagline. Credit-card companies are happy to take on customers, regardless of credit history or lack thereof. In fact, the industry got into some trouble years ago for targeting college students and other credit rookies, signing them up for high-rate, bad-deal cards and leading them into piles of fees and mountains of debt. That’s why the Credit Card Accountability Responsibility and Disclosure Act of 2009, a.k.a. the CARD Act was enacted, which made it a little harder for newbies to get their first credit card.
That’s a good thing. The CARD Act is meant to protect consumers from predatory lending practices. For example, it bars credit-card companies from doing hard-push sells on college campuses (goodbye, free hats and frisbees) and requires them to clearly detail fees, terms and rates (hello, transparency and accountability). It also restricts lenders from giving credit cards to Americans under age 21—unless they have an adult co-signer or proof that they can independently afford to repay their debts, i.e. enough income to cover minimum payments.
Still, you can find plenty of options to get started with credit cards. Keep in mind though that with no credit, your first card is likely to come saddled with a high rate and perhaps big fees and other less-than-desirable terms. That said, everyone’s got to start somewhere, and here are your best bets for a first credit card:
These kinds of cards lack the biggest risk of using a credit card—the ability to overspend. And that’s why they’re relatively easy to qualify for. Here’s how it works: You put in a deposit, say $200 to $1,000, and that’s usually your credit limit. So you can’t really go on some crazy shopping spree with a secured card, and lenders don’t have to worry about your ability to repay the debt. If you try to ghost on your account, your lender will simply keep your deposit. But if you leave your card in good standing, you get your deposit back.
In the meantime, secured cards are pretty similar to traditional credit cards, so they’re perfect for helping you practice with plastic while you build up your credit history and credit score. Many banks and credit-card companies offer a secured option, and the cards should be accepted anywhere traditional cards are. Lenders report your activity to the credit bureaus, so paying your balance in full and on time boosts your credit score.
If you carry a balance, you incur interest, typically at higher rates than unsecured cards. The average rate on secured cards is 18.81 percent, compared with 14.14 percent for all existing credit-card accounts, according to WalletHub. You also have to watch out for annual membership fees and other charges.
Academic pursuits can score you a credit card on top of a degree. In order to qualify for a student credit card, you typically need to be over 18 years old (those under 21, though, will need a co-signer or proof of income), a U.S. citizen and a student, the definition of which varies from lender to lender.
Otherwise, these cards are pretty much just like any other credit card, just targeted at students (obviously). And since card issuers generally assume that this demographic is a bunch of credit noobs, they typically offer these cards with lower approval standards, lower limits, fewer rewards and higher rates. The average rate on student cards is 17.61 percent. Bonus: Some student cards may reward good grades. For example, the two student cards from Discover offer $20 statement credits each year you post a 3.0 GPA or higher for up to five years.
Credit cards offered by retailers tend to have pretty lax requirements, save for a bit of store loyalty. But they also often have high rates—with a whopping 25.74 percent average—so you definitely want to try to avoid carrying a balance and racking up big interest charges. One upside: These types of cards also usually come with generous sign-up bonuses, as well as ongoing benefits such as store discounts and early access to sales.
If all else fails, piggyback on someone else’s good fortune. You can get your own credit card—with your name on it and everything—through somebody else’s account, if they’re willing to sign you on as an authorized user. You never even have to get your credit checked at all to be added. The primary user just needs to make a call or take care of it online. Even a baby can be named as an authorized user. (Some parents might even want to add their kids—though maybe not they’re actually still babies—to their accounts to help them build a credit history early on.)
But you do need a lot of trust to make this arrangement work. The account holder remains solely responsible for the debt, including paying the bills on it, so being hesitant to offer this credit assist is understandable. After all, if you run up a big balance, not only could you stick them with that bill, you could hurt their credit score, as well as your own. And vice versa: If they overspend or miss payments, your no-credit status can get even worse. So be careful who you try to join credit forces with. If you’re fortunate enough to have someone you know and trust do you this favor, be clear about your responsibilities and expectations of one another and respect them.
Whichever kind of card you decide to go for, be sure to dig into the fine print to compare your specific options and find the best fit for you. You want to get a card with the lowest possible annual percentage rate (APR) available to you—which, remember, will still likely be on the high side since you have no credit. If there’s a special introductory APR, understand how long you get that rate before it hops to whatever the regular rate is. You also want to avoid annual membership charges and other superfluous fees, if possible. And find out if you get any perks with the cards, whether it be rewards or extras like rental car insurance or free credit education tools.
Finally, once you settle on a card you qualify for, make sure you handle it responsibly. That means staying well below your spending limit and paying each bill on time every month, covering at least the minimum required and ideally the full balance. Doing all this will help you build up your credit history and boost your score. And before you know it, having no credit will no longer be an issue.
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