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How to Choose Your First Credit Card

May 29, 2018

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Your next credit card could be your first step in building your credit score or traveling to an exotic destination with earned airline miles. But there are hundreds of cards to choose from, and it can be difficult to know where to start.

Before securing your next credit card, consider 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 practical credit card alternative. Personal loans can help you to consolidate existing credit card debt. Varo offers personal loans with rates as low as 8.90% Annual Percentage Rate (APR), while rewards credit cards’ rates tend to range from 17.99% to 24.99% APR.

Whether you pick a credit card or personal loan, these financial habits 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 ding your credit. To ensure timely payments, you can 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-reward cards, and the higher interest payments could cost you more than you earn in rewards.

You’re Working on Building—or Rebuilding—Your Credit

A secured credit card may be a good fit if your credit score is below 670, and you’re looking to build or rebuild it. For example, if you are recent graduate, a secured credit card can help you to start building credit.

When you open a secured credit card, you 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 may report those payments to the credit bureaus, which could help you build a good credit history.

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.  

You Have Great Credit and Want Premium Travel Benefits

Premium rewards credit cards may require a very good to excellent credit score (740+), 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 fun 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.

Choosing Your Next Card

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. Many sites can help in your search for the perfect card, including NerdWallet,, and WalletHub, which let you filter cards by their fees, awards structures, and credit requirements.

Louis DeNicola is a freelance personal finance writer and credit enthusiast. You can find him on Twitter @is_lou

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Louis DeNicola

Louis DeNicola

Louis DeNicola is a freelance finance writer based in Oakland, California. He specializes in consumer credit, personal finance, and small business finance, and loves helping people find ways to save money. In addition to Varo, Louis works with a variety of financial services firms, credit bureaus, and educational websites, including Credit Karma, Wirecutter, Funding Circle, and Experian.

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