When should you get your first credit card?

Thinking about applying for your first credit card but not sure if you’re ready to take the plunge?

You’ve come to the right place.

Opening your first credit card is a big financial move. That’s because it can help you build your credit score, which can set you up for success in the future. As a result, applying for a credit card early in life is often a solid move. The trick is figuring out when you should get your first credit card based on your unique financial situation.

Here’s everything you need to consider when deciding if you’re ready for your first credit card. Equipped with this knowledge, you can feel empowered to make the best decisions with your money.

The pros and cons of using a credit card

Before we dive into the details of when you should get your first credit card, we should first discuss some of the benefits and risks of using credit cards in the first place.

While many of us simply use credit cards for day-to-day purchases, the reality is that credit cards are powerful tools that can help or hurt your financial situation based on how you use them. That means that anyone thinking about taking out credit needs to fully understand what they’re getting themselves into before they apply for their first credit card.

With that in mind, here are some of the key benefits of opening a credit card:

• Allow you to build a credit history – Building up a credit history is one of the primary reasons why people choose to open a credit card. That’s because having bad or non-existent credit can hamper your ability to get a loan or rent an apartment. Opening a credit card—and using it responsibly—is a great way to build your credit history or improve your credit score.

• Minimizes your need to carry cash – Our world is rapidly turning into a cashless society, making your loonies and toonies less valuable by the minute. This transition has its pros and cons, but keeping up with these changing trends often requires having a credit card on hand for regular purchases.

• Potential for rewards & benefits – Many credit cards now offer rewards and other sweet benefits, such as airline miles or cash back, just for using your card. Although your first credit card likely won’t come jam-packed with rewards (more on that in a bit), you can often get great extra perks with your card once you build up a good credit score.

As you can see, there are plenty of excellent benefits to opening a credit card. However, we can’t stress enough that there are risks to using credit that you need to understand before you apply for your first card. Some of the most important risks to recognize include:

• Potential to drive you into debt – If you pay your card statement in full every month, you won’t go into debt. But the convenience of credit cards makes it easy to build up more debt faster than you’re able to repay.

• High interest rates – Credit cards are known for having high interest rates, with some lenders charging up to 25% on unpaid balances — eek! Those interest rates can add up quickly if you don’t pay off your card every month.

• Potential damage to your credit score – We’ve already mentioned that credit cards can help you build your credit score when used responsibly. However, making late payments or carrying a balance on your card can do major damage to your score, too.

"Opening a credit card—and using it responsibly—is a great way to build your credit history or improve your credit score."

When should you apply for your first credit card?

At this point, you have a solid understanding of the risks and rewards of using a credit card, AKA all the information you need to decide if you’re ready for your first credit card.

There’s no standard recommended age for when you should get your first credit card, so long as you meet the minimum required age (either 18 or 19) in your home province or territory. Rather, the best age to open a credit card is whenever you feel confident in your ability to handle the risks that come with revolving credit.

Alternatively, if you don’t think that you can commit to paying off your monthly statement on time and in full, then you’re probably not ready for your first credit card. In that case, signing up for a KOHO reloadable prepaid Mastercard card can be a great alternative. It offers the perks of a Mastercard, like cash back and robust security, but it’s prepaid, which means you only use the funds you’ve already preloaded. In other words, no high interest repayments or credit score damage.

What you need to know before getting your first credit card

So you’ve decided that you’re ready to apply for your first credit card — congrats! That’s a big step in your financial life that can have some benefits for you down the line.

However, completing your first credit card application can feel a bit overwhelming. To get you started, here are some essential things to keep in mind as you apply for your first card.

Qualifying for a credit card

The first thing to keep in mind when applying for a credit card is that you need to meet some minimum eligibility requirements:

• Being at least the age of majority in your province or territory (usually 18 to 19 years old)

• Holding permanent residence or citizenship in Canada

• Having a social insurance number

• Not associated with an undischarged bankruptcy

For most adult Canadians or Canadian permanent residents, meeting these minimum eligibility requirements is not an issue. But we should mention that, in addition to these requirements, you will also need to have an acceptable credit score, which varies from one credit issuer to another.

While it is possible to get a credit card with bad credit, which is generally defined as any credit score of less than 560, doing so isn’t easy. In these situations, getting a secured credit card or taking other steps to improve your credit score before applying for your first card will increase your chances of approval.

How to apply for a credit card in Canada

As soon as you’ve determined you’re eligible for your first credit card, it’s time to actually apply. Here’s how it works:

1. Choose a credit card – Although there are hundreds of credit cards out there, you’ll likely want to apply for a card that’s designed for people with average credit, even if it doesn't come with fantastic rewards. That’s because these cards have lower minimum credit score thresholds, which are ideal for first-time applicants.

2. Fill out the online application – Most credit card issuers have an online application form. This application usually asks for your name, address, social insurance number, and current income information.

3. Wait for a decision – Once you submit your application, the credit issuer will review your information. Depending on your financial situation and credit history, you may get immediate approval or rejection. In some cases, your application will be reviewed by a credit specialist, so you may have to wait a few days for a response.

"Rather, the best age to open a credit card is whenever you feel confident in your ability to handle the risks that come with revolving credit."

How to use a credit card responsibly

If your application is successful, you’ll be able to use your card within a matter of hours or days. But opening a credit card is just the first step of a lifelong process of being a responsible cardholder.

Now that you have your snazzy new card in hand, there are a few key things to keep in mind to ensure that you use your newfound financial powers responsibly:

• Know your card’s agreement & terms – You’ll be presented with a whole lot of information about your card when you open your account. Read through these documents so that you understand any charges, fees, and due dates associated with your account.

• Always make payments on time – Every credit card has a payment due date, which is normally a few weeks after you receive a statement. It’s vital you stay punctual with those credit card bills, as missing a payment can negatively impact your credit score.

• Stay well below your credit limit – Your card’s credit limit is a safety net, but you should always try to stay well below it each month to prevent yourself from going into debt. Refrain from using more than 30% of your total card limit.

• Pay your balance in full every month – You should strive to pay your card off in full every month to avoid accruing interest on your unpaid balance. If you had an unforeseen emergency expense that you can’t pay off right away, try to pay more than the minimum payment each month to minimize any accrued interest.

What happens if your credit card application is denied?

Although we hope that your first credit card application is successful, rejected applications are just a part of life. If this happens to you, don’t fret — you still have options. Here are a few steps you can take to improve your chances of approval next time:

• Consider your credit score – If your application was rejected, you might just need to search for a different card. Some credit cards — especially those with rewards — are only available to people with excellent credit. Look for cards that are designed for first-time cardholders.

• Check minimum income requirements – Some credit cards have minimum income requirements. This requirement is usually listed on the card’s information page, but it’s worth double-checking before you apply.

• Pay off your existing debt – Credit issuers are less likely to approve applications for people who already have a large amount of debt relative to their income. In these situations, you may want to try to pay off your existing debt first and then apply again at a later date.

• Review your credit report for errors – Although it isn’t very common, it is possible to have inaccuracies on your credit report that can hurt your chances of approval. If your applications keep getting denied, it may be worth reviewing your credit report for any issues. You can then dispute these inaccuracies and have them wiped from your record.

There’s more to good credit than opening a credit card

Whether you’ve decided that you’re ready for a credit card or want to wait a bit before applying for your first card, it’s important to remember that there’s more to credit than getting a flashy plastic card.

In reality, having good credit is about staying on top of your monthly payments so that you don’t go into unnecessary debt. As a result, the best time to get your first credit card is when you’re confident that you can handle the risk that comes with this powerful tool.

Even if you don’t feel ready to apply for a credit card, there are ways that you can establish credit history before you apply for your first card, like KOHO’s Credit Building tool. That way, you can apply for your first card whenever you’re ready, at which point you’ll have a longer credit history behind you to bolster your application.