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Applying For Your First Credit Card

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know the benefits and pitfalls of applying for your first credit card

For many young people, receiving their first credit card it is a right of passage, representing a new responsibility as well as a new world of opportunity. A credit card will allow you to purchase items such as TVs, travel packages and other big ticket items if you don’t have the cash yourself. In addition to this convenience a credit card will also give you the chance to build a credit record, a crucial step toward eventually buying your own home. 

However a credit card can also be a recipe for disaster if you spend beyond your limits, don’t budget for timely repayments or have multiple credit cards on the go at once. If you don’t yet have a credit card it’s good to be aware of the pitfalls and things you need to watch out for when comparing the market. Below you’ll find a basic guide to identifying and applying for your first credit card.

The Minimum Requirements:  

You need to be at least 18 - If you want to apply for any credit card at all in your own name, you'll need to be 18 years old. However, it may be possible for your parents to open a credit card account, get an additional card linked to their main account and then give it to you.
You need to meet the bank's minimum income requirements - For each card, the bank will look for a minimum taxable income. If you want any hope of being approved, you'll need to earn at least the minimum, if not more. However, some cards do have quite low minimum income requirements. If you are self employed, you may be asked to provide proof that you have been trading profitably for at least a year.
You must be an Australian citizen - This won't be an issue for the vast majority of readers here, but practically every credit card offer on the market requires you to be an Australian resident with citizenship in order to be approved. If that isn't you, there's no point applying.
You may need a good credit history - For some cards, but not all, you'll need to have a good credit history. Most of the cards that cater to the first timer will have a much lower expectation than the more prestigious platinum cards, where you'll be required to have a good to excellent rating. Before applying for a credit card it might be worthwhile to get a mobile phone contract or small financing deal (for example on a computer) in order to show that you can be relied on to pay what you owe.

What to look for: 

A card designed for first timers - When you're just starting out with credit cards, you've got to accept that you probably will not be approved for a gold or platinum level credit card. In fact, you may not even be approved for a rewards credit card. First time credit card applicants should be looking for cards designed for them with requirements that they can meet.

Low Interest Rates: 

We've all heard the horror stories of people getting themselves into financial trouble after spending frivolously on their credit cards. Hopefully you won't be one of those people and will pay your balance off in full each month. Even so, look for a card that charges as little as possible for purchases and cash advances (a feature best avoided unless in emergency cases).

Low or No Annual Fee: 

You want to save as much money as you can. Low interest rates will help you do this, but so will a cheap or no annual fee. Many cards suitable for first timers do charge a small annual fee. The last thing you'll want is a card with a high annual fee, especially when you're trying to keep all your payments current so that you can build your credit worthiness.

Balance transfer deals don't matter much:  

Balance transfer offers are a popular feature that allow you to move an outstanding debt to another card offering a cheaper interest rate. But they aren't really applicable to first time applicants for the simple reason that you won't have any outstanding credit card debt. 

Rewards Programs Aren't Necessary: 

Some cards have a rewards program whereby cardholders can earn points per dollar spent and redeem them for anything from Qantas Frequent Flyer points to hotel stays. Rewards cards tend to have higher minimum criteria, particularly for earnings and credit score, and as such aren't designed for first timers. When you've had a card for a while and built up your credit score, then you can think about applying for one of these, but don’t be lured by the rewards without fully investigating the costs and (usually higher) interest rate involved.

Penalties and Fees: 

Before you apply, check what you'll be charged if you miss a payment or exceed your credit limit. These details are all available from the bank. Hopefully you won't be late on payments and manage your spend, but knowing what is charged can help you decide what to apply for.

Keep in mind if you don’t meet the minimum requirements, or if you aren’t sure you have the income to keep up with repayments it might make more sense to instead apply for a Debit Card through your savings account, which is a much simpler application process.  Plus there's no risk of getting into debt as you are spending your own money.
Endeavour Bank has a Visa credit card available for eligible members with a competitive interest rate, up to 55 days interest free, with a added benefit of payWave. You can find out more by speaking with one of the friendly Endeavour staff on 1300 13 14 20, visiting your local branch or you can apply online.

Alison Gallagher is a freelance writer, resourcefulness expert and entrepreneur. She has been featured in various publications including Stellar Magazine, Australian Health and Fitness Magazine, and Cleo Magazine. Alison is particularly passionate about sharing practical tips on how to live simply, sustainably and seasonally.