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Credit Cards

How to Choose Your First Credit Card

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Your first credit card can have a big impact on your future financial options. The right card can help you build a good credit history, but the wrong one can lead to missed benefits.

There’s a lot to consider with your first credit card with over 4,000 unique credit card issuers, ten different card types, and specific subtypes under each. Luckily, some credit card options cater to first time credit builders!

Before you can make an informed decision, you’ll need to understand the basics of credit cards (how they work, their advantages/disadvantages, and how they differ from debit cards) along with important factors to consider when choosing your first card (paying attention to interest rates, fees, reward programs, and credit limits).

If you’re someone who wants to be strategic when selecting your first credit card, we genuinely hope this article is helpful to you.

Understanding Credit Basics

Credit lets you borrow money, under the agreement you'll pay it back later, often with interest added to the borrowed amount. It's crucial in shaping your financial opportunities – think of your credit history and score as a snapshot of your borrowing savvy, covering everything from credit cards to loans.

For the past ten years, the average FICO Score in the U.S. has stayed right around 715. This stability shows people are getting better at understanding how important their credit is for their financial future. 

But consumer awareness alone is simply not enough. Credit now gives a clearer picture of our financial habits, meaning it's crucial to pay close attention to managing and enhancing your credit. The good news is, there are more resources at your fingertips today than ever before, and you’re working within a relatively stable economy. Be diligent in taking charge of your credit and continually use what you learn to make smarter choices. Creating a strong credit history shows lenders you're reliable with money. This could lead to lower interest rates, more generous borrowing limits, and possibly even the green light on bigger loans like a house or new car. Conversely, a weak credit history might block access to loans, make it tough to find a place to live, or even affect job opportunities. By focusing on your credit, you're making every smart decision count towards building a foundation that can support your future ambitions.

How Credit Cards Work

Using your credit card for a purchase is like taking a short loan from the card company. Every month, they'll send you a bill for what you've spent. But, if the bill isn’t paid off in full and some of your balance carries into the next month, interest gets added to what you owe. It's a straightforward way to manage your finances and encourages timely payments to avoid extra costs. Let this highlight the importance of being mindful with credit and keeping your financial health in check.

Debit Cards vs Credit Cards

When deciding between a debit card or credit card, understanding key differences can help you make more informed choices about managing your money and enhancing your financial wellness.

  • A debit card draws directly from your bank account, using the money you already have. A credit card, on the other hand, is like taking a small loan for each purchase, which you'll need to repay.

  • Credit cards often come with perks like cash back or points for travel, giving you extra benefits for the spending you're doing anyway. Debit cards, while convenient, usually don't offer these kinds of rewards.

  • Using a credit card responsibly — that means paying off your balance on time — can boost your credit score and lead to improved financial opportunities. Debit card use, while useful for managing daily expenses, doesn't have the same effect on your credit history.

Note: Contrary to typical credit cards, the Varo Believe Credit-Building Card is funded prior to making purchases. Money is first transferred into your Secured Account, which becomes your available spending limit (similar to a checking account).

Factors to Consider When Choosing Your First Credit Card

When it's time to pick your first credit card, diving into the details makes all the difference. By focusing on a few critical factors, you'll be better equipped to choose a card that not only fits your current lifestyle but also supports your financial ambitions. Let’s walk through what you need to know to make that informed choice on the perfect credit companion.

Annual Percentage Rate (APR)

A key element in choosing your first credit card is understanding the Annual Percentage Rate (commonly known as APR). Think of APR as the cost of borrowing money on the card—it's the rate at which interest will be applied if you don't pay off your full balance each month. For anyone diving into the world of credit, keeping an eye on the APR of your card options will allow you to be strategic in your choice. Finding a lower APR credit card can be a smart move, as it allows you to pay less interest should you ever need to spread out payments over time.

Additionally, some cards offer an introductory APR, which is a lower rate that applies for a limited time after you open the account. If you choose a credit card like this, be sure to understand what the ongoing APR will be once the introductory period ends.

Common Credit Card Fees

Diving into the world of credit cards brings its own set of rules, and one key playbook to master is the variety of fees you might face. Keeping these in check can help ensure your credit journey starts on the right foot:

Annual Fees: Imagine paying a fee every year just for the privilege of owning a credit card. For newcomers, steering clear of annual fees is a savvy move, keeping your costs down and your spirits up.

Late Payment Fees: Remember, credit card companies aren’t fans of waiting. Paying late can lead to extra charges, turning small oversights into expensive lessons. Be aware of late fees and always aim for punctuality for credit card payments.

Balance Transfer Fees: Eyeing to move your balance from one card to another? Watch out for balance transfer fees, typically a slice of the amount you’re shifting. It’s worth weighing this cost before making a move.

Foreign Transaction Fees: Making purchases in another currency can attract additional fees. For those bitten by the travel bug, finding a card that waives these fees can be a smart choice.

Rewards and Benefits

Whether it's cashback, points, or miles, rewards and bonuses can add a sprinkle of joy to every purchase you make. As you stand on the threshold of selecting your first credit card, pause and reflect on your spending habits. Are you the kind to revel in the flavors of dining out? A card that offers a hearty cash back on food adventures might serve up the rewards you’re looking for. Yet, the world of credit card rewards doesn't end at dining tables. 

Many cards extend a hand with extra benefits like travel insurance to shield your journeys, purchase protection that watches over your acquisitions, and extended warranties that promise you peace of mind. Tempting as these additional perks are though, remember that they're just the icing, not the cake. What’s more important is that you find a card that echoes your financial habits and goals.

Credit Limit

Your credit limit is the most money you're allowed to spend on your credit card. If you're getting a credit card for the first time, you likely won’t be able to borrow as much as those who have been building credit for a prolonged period of time. The bank that provides your credit card will look into your credit history and decide on your individual credit limit.

Remember, your credit limit should be seen as a maximum. If you are consistently spending up to your full limit, it might look bad on your credit report. It may be a smarter choice to spend a smaller amount of your total limit (or at least ensure the balance gets paid down before your due date).

The Best Options For New Credit Cards

If you are new to the world of credit and have little or no credit history, it may be difficult to qualify for a traditional credit card. Here are the easiest credit-building methods we recommend.

Secured Credit Cards

A secured credit card requires a cash deposit, which serves as collateral and usually determines your credit limit. For example, if you put down a $500 deposit, your credit limit will be $500. This deposit reduces the risk for the card issuer, making it easier for individuals with limited credit history to qualify.

The main benefit of a secured credit card is that it allows you to build a credit history with responsible use. Just like a traditional credit card, your payment history and credit utilization are reported to the credit bureaus. 

Secured credit cards work a bit differently than traditional unsecured cards. With a secured credit card, you put down money upfront—say, $500—that acts as a safety net for the credit card company. This money then dictates how much you can spend. So, if you put down $500, you can spend up to $500. It's a win-win because the credit card company feels safe, and you get a chance to show that your first credit card is being managed responsibly.

The main benefit of a secured credit card is that it allows you to build good credit, without going into debt. By spending money you’ve already deposited, improved credit scores are more attainable than ever. Remember, just like traditional credit cards, your payment history and credit utilization are reported to the credit bureaus when using a secured credit card.

Other Credit Card Options

If a secured card isn’t your vibe, there are other options to consider for first-time credit cards:

  • Student Credit Cards: College students can qualify for student credit cards with more relaxed eligibility requirements and tailored rewards programs, such as bonus cash back on textbook purchases or good grade incentives. Some student credit cards also offer educational resources to foster responsible credit habits.

  • Becoming an Authorized User: As an authorized user, you'll receive your own card linked to the primary cardholder's account, and their payment history will be included in your credit report. Just be sure to choose a primary cardholder with a strong credit history and responsible credit behavior, as their actions will impact your credit score whether positive or negative.

  • Co-Signed Credit Cards: If you're finding it tough to get your own card, you can team up with someone who has good credit instead. They can co-sign your application, which might boost your chances of getting approved. Just remember, if you can't pay, then they will have to, and any missed payments could negatively impact both of your credit scores. Make sure you are on the same page with each other before diving into this option.

While a secured credit card is a great start, it's not the only way to kick off your credit journey. Think about what fits your life and your credit goals. Choose wisely, use your card smartly, and you could be on your way to building a credit history that rocks.

Here’s to Your First Credit Card

Selecting your first credit card is a big deal when attempting to build a sturdy financial future. Understanding credit basics, prioritizing cards that match your lifestyle, and spending wisely are great ways to establish a strong credit foundation. By having a game plan and sticking to it, you’ll be prepared to take control over your credit journey.

Our Varo Believe Credit Building Card is a secured credit card that can help you build credit history through responsible use1. Unlike many other secured cards, the Varo Believe credit-builder card offers:

  • All credit history accepted

  • No annual fees

  • No minimum security deposit

  • No credit check needed to apply

  • Autopay feature to ensure on-time payments

  • Ability to set your own spending limit

Remember, building credit is a marathon, not a sprint. Building a strong credit history requires time, patience, and consistently healthy money habits. Start taking smart financial steps early, and you'll be well on your way to unlocking the many benefits good credit can provide.

Get started today or click to learn more about the Varo Believe Credit-Builder Card!


1 The Varo Believe Secured Credit Card is designed to help you build your credit; however, a variety of factors impact your credit including payment history, utilization, derogatory marks, account age, total number of accounts, and inquiries--not all factors are equally weighted. Building your credit may take time and is a process, but the Varo Believe Card may be able to help when you consistently make on-time payments.

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