Your First Credit Card: A Complete Guide to the Best Cards For Beginners

A credit card can be useful in many situations, but there are a few pitfalls to consider before you apply. Most importantly, the amount you owe can quickly increase, making your monthly repayments less manageable and pushing you into debt. And with so many different types of credit cards to choose from – and so much jargon to decipher – it’s not always easy to know which credit card is right for you. 

So, if you’re thinking about applying for your first credit card, perhaps because you’ve recently turned 18, are new to the UK, or are considering the best way to fund a big purchase, this guide will help you work out if you’re ready for a credit card, decide on the best credit card to suit your needs, and explain how to apply for a credit card. 

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What’s the difference between credit and debit cards?

If you’ve never had a credit card before, you might not be totally clear on how they differ from debit cards. The key difference is that a credit card is a way of borrowing money. Unlike a debit card, where the money you spend is taken out of your bank account, a credit card allows you to spend up to a set limit – your ‘credit limit’ – provided that you agree to pay the money back, with interest, over a period of time. You’ll receive a statement telling you the minimum payment amount due each month, but you also have the option to pay more – or repay the full amount you’ve borrowed in one go. 

There are three main reasons why people choose to spend using a credit card:

1. It’s a convenient and flexible way to spread the cost of a large purchase. 
2. Managed well, it can help you to build or repair your credit score. 
3. When you spend between £100 and £30,000 you’re covered under Section 75 of the Consumer Credit Act 1974, which means you won’t end up out of pocket if there’s a problem with your purchase. 

» COMPARE: Best credit cards

How do credit cards work? 

When making a purchase, a credit card works in much the same way as any other type of payment card: you can use it to pay online, or in-store using contactless or Chip and PIN. Some cards can be added to a digital wallet such as Apple Pay or Google Pay, giving you the option to pay with your phone, smartwatch or tablet. 

However, that’s where the similarities end. When you pay using a credit card you will need to repay at least a set amount each month (known as the ‘minimum payment’), along with interest and possibly some additional charges, particularly if you use your card overseas or withdraw cash. 

You can only spend up to your credit limit (the maximum amount you can borrow), but it’s better for your credit rating if you can keep your spending to a minimum. There are three main reasons for this:

1. If you go over your limit you will probably be charged an over-limit fee (typically £12), and doing so can also damage your credit score. 
2. You will pay interest on the amount you borrow, so your debt could mount up, making it harder to manage the payments and clear your balance. 
3. It’s better for your credit score if you use less than 30% of your available credit. This is known as your ‘credit utilisation ratio.’ Using more than 50% of your available credit can start to affect your credit rating – and if you use more than 75% it could hurt your credit score. 

You can usually keep track of your spending via your provider’s app, but you will also be sent a monthly statement. You can choose whether to receive a paper statement in the post, or an electronic statement. This will detail how much you’ve spent, how much interest you’ve been charged, how much you need to repay, and your repayment date. Aim to make your payment a few days in advance so you can be certain that your account updates in time. 

» MORE: How do credit cards work?

Credit card jargon explained

Credit card jargon can be confusing, so here’s a brief guide to some of the language you’re likely to see when you’re deciding whether to apply:

Annual fee: Some credit card providers charge their customers an annual (or monthly) fee. Those who do usually offer something in return, such as extra perks and rewards. 

APR/Annual percentage rate: This is how much it will cost you to borrow over a year, including interest and standard fees. So if your card has an APR of 25%, you will pay an estimated extra £25 if you spend £100 on your credit card and don’t repay it for a year. Different cards offer different APRs, so it’s a good idea to compare them to identify the cheapest option. Put simply, the lower the APR, the less interest you will pay. 

Cash advance: In most cases, this means using your credit card at an ATM to withdraw cash. However, other types of spending are also considered to be a cash advance, such as using your card to pay utility bills or buying foreign currency. It’s important to be aware of this because you can be charged a fee and a higher interest rate for a cash advance – and it could even hurt your credit score if you make a habit of it. 

Credit limit: This is the maximum amount you’re able to spend, which is based on your personal circumstances and your credit history. Your credit limit isn’t set in stone as your provider may offer to increase – or decide to decrease – your limit based on how you use your card. 

Late payment fee: If you make your payment late, don’t pay enough, or miss it altogether, your provider may charge you a late payment fee. This is usually around £12.

Minimum payment: This is the minimum amount that you need to repay each month. If you can, aim to pay more – or, ideally, clear your balance in full. If you only make the minimum payment you will pay more in interest over time and it will take far longer to clear your debt. 

Interest: This is the amount of money you have to pay in return for borrowing on your credit card. Some providers offer 0% interest credit cards, which means you won’t pay anything extra for a set period of time. However, these offers are usually reserved for people with good credit scores, so you may not be eligible if you’ve never used credit in the past. 

Representative APR: This is the APR given to at least 51% of people approved for a particular credit card, so you may be offered a different APR than the one advertised. You may also see the ‘representative example’, which gives you an estimate of how much it would cost, including interest and standard charges, to borrow £1,200 in a year.                                                                                                  

Statement: Your statement outlines everything you’ve spent, any applicable fees and charges, and tells you how much you need to repay and when it’s due. It will also remind you of your credit limit and APR. You can choose to receive a paper statement in the post, or view it electronically. 

Variable APR: Many credit cards have a variable APR, which means the amount of interest you pay could go up or down depending on factors such as how you use the card and the Bank of England base rate. You may also find that your card provider increases your APR if you regularly exceed your credit limit or don’t make payments on time. 

Types of credit cards

There are several different types of credit cards available, many of them designed for specific purposes. If you’ve never had a credit card before you may not be eligible for some of them, while others, such as balance transfer credit cards, won’t suit your needs. 

If you’re considering applying for your first credit card, the following three options may be worth considering:

• Credit builder cards: If you have a poor credit score, perhaps because you’ve never borrowed before so you have no credit history, this type of card is aimed at you. Without a credit history it’s hard for lenders to assess how likely you are to repay what you owe, so these cards mitigate that risk by offering lower credit limits and higher interest rates. Managed well, these cards can help you to build your credit score, so you could be eligible for better deals in the future. 
• Student credit cards: These cards are only available to students who often have a low income and minimal credit history. Just like credit builder cards, they can be easier to get than other credit cards, but tend to have a lower credit limit and higher APR. 
• Prepaid credit cards: Strictly speaking, these aren’t credit cards as there’s no borrowing involved – you have to top them up before you can spend. However, this means there’s no need to pass a credit check, so they can be a good option if you’re looking for a convenient way to pay without any risk of getting into debt. 

» COMPARE: Best credit builder cards

Other popular types of credit cards include:

• Rewards credit cards and cashback credit cards: These cards reward you with points, Air Miles or cashback whenever you spend. Rewards can be exchanged for vouchers or redeemed at selected retailers, Air Miles can be exchanged for free flights and upgrades, while cashback is paid directly to your bank account or credit card balance. Many of these cards require you to have a good credit score, and some also charge an annual fee, or have a higher APR, so they’re best for people who plan to clear their balance in full each month. 
• 0% purchase credit cards: You won’t pay any interest for a set time with these cards, making it one of the cheapest ways to borrow. This can be a good way to spread the cost of an expensive purchase but you’ll usually need a good credit score to qualify, so it may not be an option for your first credit card. 
• Travel credit cards: Designed for use when you’re travelling overseas, you won’t be charged foreign transaction fees and will get a favourable exchange rate when you pay with these cards. They usually have a high APR, so it’s best to pay them off straight after your trip. 
• Money transfer credit cards: These can be a cost-effective alternative to a loan, as you can transfer money into your bank account from this type of card. Some offer a 0% interest introductory period, and can be a useful way to clear an overdraft or make a cash purchase. 
• Balance transfer credit cards: If you’re paying a high interest rate on an existing credit card balance, you can transfer the balance to one of these cards. Many offer a 0% interest or low-interest period, so you can save money on interest and pay off your debt more quickly. 

Advantages of getting a first credit card

Some people worry that getting a credit card will lead them into debt but, when used responsibly, credit cards can be useful for the following reasons: 

• They can be used to spread the cost of large or unexpected purchases, giving you the option to repay the money over a few months. 
• Anything you buy with your card that costs between £100 and £30,000 will be automatically covered by Section 75 of the Consumer Credit Act 1974. This means that you won’t end up out of pocket if something goes wrong with your order or the company you bought from goes bust. 
• You may not be charged interest for up to 56 days after you make a purchase. So if you’re able to repay what you spent during that time, you won’t be charged for spending on credit.  
• Some cards come with extra perks, such as cashback or rewards. 
• Provided you stay within your credit limit and make payments on time, a credit card can help to build your credit score. 

Disadvantages of getting a first credit card

Credit cards do have some disadvantages, so don’t rush into your decision – and consider the following points before you apply for the first time:

• Unless you clear your balance in full each month, you will be charged interest. Over time, these charges can add up and increase your debt – especially if you only make the minimum payment. 
• If you’ve never borrowed before, you may be offered a low credit limit, typically around £500 to £1,500. This means you may not have enough available credit to fund an expensive purchase. 
• You may be charged if you use your card overseas, miss or make a late or partial payment, or exceed your credit limit. You will also be charged a transaction fee if you withdraw cash from your card at an ATM, and will probably be charged a higher rate of interest for this than you would for making a purchase. Read the terms and conditions carefully so you can avoid these charges where possible. 
• If your application is rejected, perhaps because you don’t have a regular source of income or any credit history, this will leave a mark on your credit file which can make it more difficult to get credit in the future. 
• You could end up in debt. Think carefully about why you need a credit card, and whether you can resist the temptation to spend more than you can afford to repay. 

» MORE: Do I need a credit card?

Is a credit card right for me?

Even though a credit card can be useful, that doesn’t mean it’s the best option for you. 

If you’re confident that you won’t overspend and will keep up with the monthly payments, getting a first credit card is one way to help you build a good credit history – but it’s not the only way to do this. For example, having a mobile phone contract or utility bill in your name and simply being on the electoral roll can all help to boost your score. 

If you’re short of cash, a credit card can seem like a good way to get your hands on some extra money. However, you should think carefully before you apply and work out if you can afford to make the monthly repayments. If you’re not confident that you can afford to do this, you could soon find yourself falling into debt. 

Before you apply, it’s important to consider all your options including seeking free debt help from charities such as: 

• StepChange
• Citizens Advice
• National Debtline

Am I eligible to get a first credit card?

If you’ve never had a credit card before, you might be wondering if you’re eligible to apply. 

Although eligibility requirements vary between providers, at a minimum, you need to be:

• Aged 18 or over.
• A UK resident.
• Have a permanent address.
• To be earning a minimum annual income.
• Not declared bankrupt, have County Court Judgements (CCJs) or be subject to an individual voluntary agreement (IVA).

The next step is to use an eligibility checker, which can give you an idea of how likely you are to be accepted, and sometimes what credit limit and APR you’re likely to be offered. This is important because this check won’t show up on your credit report, so other lenders won’t be able to see any evidence of your search. Unlike an unsuccessful application, it won’t hurt your credit score if it turns out you’re not eligible, and it also reduces the risk of an unsuccessful application. 

Once you’ve confirmed your eligibility, it’s also wise to check your credit score. This is a three- or four-digit number that lenders can use to decide whether to offer you credit. 

A few different things can affect your score, such as missed or late payments, defaults, high use of credit, or a limited credit history. If you spot any mistakes, you can then ask for them to be corrected, or take steps to improve your score – which can be as simple as making sure you’re on the electoral roll. 

You can check your credit score for free with credit reference agencies like Experian,  Equifax and TransUnion, or via platforms like ClearScore and Credit Karma. 

» MORE: Can you apply for a credit card with a bad credit history?

How to apply for your first credit card

If you’ve decided that a credit card is a good option for you, and checked your eligibility, now it’s time to apply. Usually, applying for a credit card can be done online. If you prefer, you can sometimes apply in person at a branch of the relevant bank. However you choose to apply, the provider will run a credit check, so you will need to share some information including:

• Your contact details. 
• Your address (including all addresses for the last three years).
• Your bank account details.
• Your income.

You may get an instant decision when you apply online, but it’s not unusual to have to wait a few days to find out if your application has been successful. 

If your application is approved, the next step is to sign a credit agreement. You can usually do this digitally when you apply online, otherwise you will be sent paperwork to sign and return. Before you sign, check your credit limit, APR, any fees and charges and the minimum monthly payment as these might have changed since you applied. 

Don’t sign unless you’re happy with everything, because you can walk away with no obligation. Even if you sign, you can still change your mind: you have a 14-day cooling-off period, so you can cancel the agreement without explaining why. However, you will need to repay any money you have borrowed, plus any applicable interest. 

» MORE: How to apply for a credit card 

What happens when your credit card application is rejected?

If your application isn’t approved, resist the temptation to try again with a different provider straight away. Each application you make leaves a mark on your credit report, and several applications in a short time can give lenders the impression that you’re experiencing financial difficulties and make it even harder for you to get credit in future.  

Instead, check your credit report to see what you could do to improve your credit score, and use eligibility checkers before your next application to reduce the risk of being turned down again. 

How to use your first credit card

The following six tips will help you to make the most of your first credit card: 

1. Stay within your credit limit

If you’ve never had a credit card before, you may have a lower credit limit than you were hoping for, making it easy to overspend. Remember, if you exceed your limit you will have to pay an over-limit fee (typically £12), and it will also leave a mark on your credit report, which can make it harder for you to get credit in the future. To protect – and, potentially, boost – your credit score, aim to use less than 30% of your credit limit. 

2. Think about your repayments

The dangerous thing about spending on credit is that it can feel like ‘free money’, making it easy to overspend. So before you spend on your credit card, remember that you’ll have to repay what you borrow – with interest. This can quickly add up, making it harder for you to meet the monthly repayments over time. So think carefully about whether you can afford the repayments and, ideally, work out how long it will take you to pay off whatever you spend on credit. 

3. Pay more than the monthly minimum payment

If you only make the minimum payment, you could find yourself paying off your purchases for months – or even years. That’s because the minimum payment won’t cover much more than your interest and charges, so it will take much longer to clear your debt.

Before you spend, work out what you can afford to repay each month and set up a fixed monthly direct debit for that amount, making sure that you’re always paying a little more than the minimum. 

4. Don’t withdraw cash on your credit card

When you use your credit card at a cashpoint, you will be charged a transaction fee, along with a higher rate of interest. Cash withdrawals, also known as cash advances, can also hurt your credit score if you do this regularly, so try to avoid doing this if you can.  

The same charges can apply to using your card to pay utility bills, top up mobile currency or buy foreign currency – so check your terms and conditions carefully to avoid unexpected charges. 

5. Take advantage of purchase protection

Booking a trip? Shopping online? One of the advantages of paying by credit card is that anything you buy that costs between £100 and £30,000 will be protected under Section 75 of the Consumer Credit Act 1974. 

This means you could claim your money back if the item is faulty, doesn’t arrive or the company you bought from goes bust, giving you some extra peace of mind if you’ve making an expensive purchase. 

6. Make payments on time

If you pay your monthly bill late or miss a repayment altogether, you’ll be hit with a late payment charge – and this could also hurt your credit score. If there’s a chance you could forget to pay your credit card bill, protect your credit score by setting up a direct debit so your payment is taken automatically each month. If your circumstances change or you’re short of money, don’t bury your head in the sand. Contact your provider as soon as possible so that they can help you work out an affordable repayment plan. 

Your next credit card

If you manage your first credit card well, in time you may qualify for a new card with better interest rates and offers. This could mean you have the option to save on interest by transferring your balance to a balance transfer card, or avoid paying interest for a period of time with a 0% interest purchase credit card. 

You can increase the chances of boosting your credit score by limiting your spending to around 30% of your credit limit and making payments on time. Resist the temptation to apply for too many credit cards in a short period of time, and always use an eligibility tool to reduce the risk of an unsuccessful application. 

Image source: Getty Images

About the Author

Ceri Roberts

Ceri is a Lead Writer at NerdWallet UK, with expertise in credit cards, kids and money, and financial education. Previously at GoHenry, she has 25 years of experience in print…

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