Credit cards with low interest rates and minimal fees are ideal for first timer credit card holders, as they help minimise expenses while you become used to your card's features. Additionally, cards with lower credit limits and more accessible minimum income requirements can improve your likelihood of being approved.
There are millions of credit card accounts in Australia, according to the RBA. Their financial flexibility means you can extend your purchasing power today and settle the bill later. However, it's important for first timers to be aware of credit card pitfalls and how they can improve or mess up your credit score.
David Boyd, co-founder of Credit Card Compare, explains, "When choosing a credit card for the first time, narrow down your options and carefully consider their terms and features. Things to look out for include low fees, low interest rates, and a set of criteria you qualify for so your application isn't immediately declined. Check your credit score before applying and hold off applying if it flags up issues that need to be addressed. Applying with a bad credit score because of recent missed payments or a default can impact your credit score and make your application more likely to be declined."
Benefits of first timer credit cards
- Build credit history: Responsible credit card use can help first-timers establish a positive credit history, which is crucial for future financial choices such as applying for a home loan.
- Convenience: Credit cards offer a convenient payment method for online and in-store purchases. For example, travelling without one makes it tricky to check into a hotel.
- Security: Credit cards provide added security features such as fraud protection and the ability to dispute unauthorised charges. If you shop from a store that won't give you your money back, you can lodge a chargeback with the issuer.
- Rewards and perks: Many credit cards offer rewards points, cashback incentives, and other perks to cardholders. However, these are not typically the easiest to get approved for since they usually have a higher set of minimum criteria.
Choosing the best first timer credit card
- Interest rates: Compare the interest rates on different credit cards. Look for low introductory or competitive ongoing rates to save on interest charges should you not pay the balance in full.
- Fees: Consider annual fees, late payment fees, and foreign transaction fees. These can add up.
- Rewards programs: Which rewards program aligns with your lifestyle, spending habits, and preferences as a frequent flyer? If you are a Qantas and oneworld loyalist, then you might consider a Qantas Points-earning credit card over one that earns Velocity Points.
- Credit limit: Minimum and maximum credit limits vary between different cards. Choose one that suits your financial needs and pattern of spending.
- Additional features: Consider additional features such as travel insurance and airport lounge access that may benefit you.
