Getting A First Credit Card

For many students, getting their first credit card involves becoming an authorized user on a parent's account, obtaining a specialized student credit card from one of the numerous banks offering programs designed to get young people with little or no credit experience into the system, or opening a secured credit card account.

So-called student cards are actually available to anyone with minimal positive and few negative items on their credit reports They're called student cards because banks offering them typically promote them heavily to college students. Initial credit limits are usually very low, but paying the bill promptly each month will cause the bank to consider raising the limit at specified intervals and help you build a high-rated credit report.

Secured credit cards are exactly what their name applies. They're credit cards, usually MasterCard or Visa, with an initial credit limit that is equal to the amount you deposit with the bank when opening the account. Several important features makes them vastly different from debit or check cards. For one thing, you can make monthly minimum payments on purchases made with a secured credit card, whereas with a check or debit card all the money comes out of your balance at once.

Also, payments made on a secured credit card account are typically reported to credit reporting bureaus the same as payments made on a non-secured credit card account. This makes secured cards an excellent way for a student or any other person opening a first account to build a positive credit record. Finally, many banks issuing secured cards will raise your maximum secured card credit limit above the amount you have on deposit after a certain number of months provided you've made all the payments on time. Some even allow you to withdraw your deposit after a specified amount of time.

Like obtaining a secured card, becoming an authorized user on a parent's account does not require a credit check. It also has the advantage of not requiring an advance deposit to open a new account. The drawback is that while most (though not all) banks report secured account payments to credit bureaus, very few report payments made to authorized user accounts by anyone except the primary card holder. This makes these accounts less useful for building up a favorable credit profile if you aren't the primary card holder.