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Credit Cards

How to choose your first credit card

Getting your first credit card is a major milestone, and a big step forward in terms of your financial future. Whether you’re looking to build credit, make a large purchase, or start earning airline miles for a future vacation, having a credit card can provide you with a number of opportunities provided it’s used responsibly.

As with any major financial decision, it's important to do some research beforehand to ensure you choose the right card for your needs and your budget. Even if you already have a firm understanding of how credit cards work, it's vital to assess whether you can spend responsibly with it, as racking up significant credit card debt can have serious ramifications over time.

Determining why or if you need a credit card is the first step, after which you should gain an understanding of how they work and how cards’ different terms and rates will impact you financially.

With so many different cards to choose from, it can be difficult to know where to start. Before applying for a credit card, here's what you need to know about whether it's the right decision for you.

Should I get a personal loan instead of a credit card?

If you’re considering getting a credit card, you may want to decide whether a personal loan might better suit your needs. If you know you have a large expense on the horizon—like a home improvement project, medical procedure, or wedding—a  personal loan may be a more practical alternative to a credit card.

A personal loan is money lent to you with interest. You have to pay the loan amount back plus interest back within a timeframe that you and the lender agree on. Because personal loans generally offer lower interest rates than credit cards, that means you’ll probably have to pay less back to the lender than you would if you made the same purchase using a credit card.

One of the main reasons that people utilize personal loans is that, unlike a mortgage or car loan, they don’t need to be used for a specific purpose. And, unlike credit cards, they come with the added benefit of a fixed interest rate and repayment terms. If you’ve already racked up debt using credit cards, personal loans can be used to consolidate that existing credit card debt.

What should I do before getting a credit card?

Before you secure a credit card, it’s important to take a few initial steps to ensure you’re making the right decision while assessing what your options are based on your credit and spending habits. 

Determine if it’s right for you

Credit cards can be a useful financial tool when used properly. In addition to helping you build credit over time, credit cards can help protect you from fraud, provide rewards, miles, or other perks on certain purchases, and even offer some travel insurance benefits. Not to mention, they make purchases convenient while providing a number of protections to cardholders.

On the flip side, credit cards also come with some risk if you’re prone to spending outside of your means. Using them irresponsibly or missing payments can lead to significant debt and damage to your credit. 

Even though your credit card will have a spending limit, it’s important to not make purchases that you won’t be able to pay off in the future, especially when you factor in the interest you’ll be accruing if you don’t pay it off in full each month. And, if you have to continue using your card while attempting to pay off your balance plus interest, it can take years to finally make progress on your credit card debt. 

With that in mind, take a hard look at both your budget and your spending habits when deciding whether a credit card is right for you.

Check your credit score and credit report

Your credit score is a 3-digit composite of your financial history, specifically focused on your habits of borrowing and repaying money. Lenders use your credit score as a factor in determining whether they should let you borrow money or open up a new line of credit. 

A high score suggests healthy financial behaviors and a good repayment history, whereas lower scores reflect missed payments or a higher-risk borrower. The higher your score, the better. 

Your credit score will help the lender determine what spending limit and APR (annual percentage rate) they are willing to offer you based on how trustworthy you appear as a borrower.

There are 3 primary consumer credit reporting companies in the United States—Experian, Equifax, and TransUnion. These companies collect and receive data on hundreds of millions of consumers, and they organize all this information to create and sell credit reports. Federal law requires all 3 of these companies to provide you a free credit report every 12 months when asked, and you can access your credit report quickly and easily by using a site like

Before you apply for a credit card, you may want to determine which credit score the creditor uses and check that score first. When you apply, the company may review your credit report and the resulting hard inquiry could hurt your score a little. Knowing if you have a high enough score to qualify can help you avoid an unnecessary hard inquiry.

Other things to consider

No matter what type of credit card you go with, there are a few other things to keep top of mind that can help save you money and build your credit.

  • Always make payments on time. Ideally, you should only use a credit card for purchases you can afford to pay off in full when the bill is due. If you must carry a balance, always make the minimum payments on time to avoid late-payment fees. If you miss payments on a regular basis, not only will fees add up, it could also damage your credit. To ensure timely payments, you can usually enable autopay by providing your bank account information.

  • Review the terms and fees. Credit cards may offer promotional interest rates or bonuses to entice you to apply. Carefully review the terms to avoid getting surprised later. Also, look for common fees, such as an annual fee, balance transfer fee, or foreign transaction fee.

  • Look closely at the APR. If you think you may have to carry a balance, your card’s APR will determine your monthly interest payments. Rewards credit cards may have higher APRs than non-rewards cards, and the higher interest payments could cost you more than you earn in rewards.

If you’re working on building or rebuilding your credit

A secured credit card may be a good fit if you have a low credit score and you’re looking to build or rebuild it. For example, if you are a recent graduate or have never had a credit card before, a secured credit card can help you to start building credit.

When you open a secured credit card, you generally have to send the issuer a refundable security deposit. The issuer may use the deposit to determine your credit limit, and will return it when you close the account, or could keep it if you default on your credit card bill.

If you make on-time monthly payments, the card issuer reports those payments to the credit bureaus, which can help you build a good credit history.

Ready to get on the path to achieving your credit goals? The Varo Believe Card enables you to start building credit today, and comes with no minimum security deposit, no annual fee or interest, and no hard credit check to apply. 

Every purchase you make on a Varo Believe Card can help you build credit. Every time you make an on-time payment, you’re building your credit history. By using your own money to start building credit responsibly, it helps you avoid falling into unmanageable debt. 

Varo reports your payment history to the three major credit bureaus and displays your current credit score in your Varo app. Not to mention, you can rack up cashback from more than 50 brands when you shop online or in-store with your Varo Believe Card.1

If you have good credit and want a simple rewards program

If your credit score is in the high 600s or above, you may be eligible for a rewards credit card. Some rewards cards offer bonuses for purchases at specific merchants—such as grocery stores or gas stations—while others let you earn miles or points through travel loyalty programs. 

If you don’t want to deal with tiered earnings rates or a points or miles program that may be complicated, a simple cash-back card could be a good fit.  

If you have great credit and want premium travel benefits

Premium rewards credit cards may require a very good to excellent credit score (740+) to open, with annual fees as high as $200 to $550. Cardholders who frequently use their credit cards may benefit from higher rewards rates on purchases, which may offset the relatively high annual fee.

Premium cards may also offer valuable and enjoyable perks, such as status in an airline or hotel loyalty program, access to airport lounges, statement credits to offset select types of purchases, and higher limits and coverage on complimentary insurance and protections.

If you have a favorite hotel chain or airline, you may want to look for a co-branded premium travel card from that company. Otherwise, a more general premium travel card may be a good fit for you.

These recommendations are only a brief introduction to the many credit card options—choosing the right card is highly dependent on your specific financial habits and needs. Before securing any new credit card, determine whether you can use it responsibly and do your research in terms of finding the right card for you. After that, look at your credit card as a powerful financial tool for building credit while making on-time payments, ideally in full. Doing so can help ensure that you’re taking advantage of all your card offers without the risk of debt.

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