What are Starter & First Time Credit Cards?

 

If you have never had credit before, there is no record to demonstrate that you can manage it effectively. There is no exam we can take to show that we know how to manage credit, and all too often individuals spend well beyond their means of repayment. This makes it very difficult for credit card issuers to supply credit to individuals without a credit history.

Yes, some people who go to university are able to access a credit card through their student bank account, but for around 50% of the population who do not attend university, getting access to credit (especially in the current economy) can be very difficult. This is where starter or first time credit cards come in. In many respects they are the same as other credit cards, but with one notable difference - higher interest rates.

Credit card issuers tend to price their products in a similar way to the insurance industry. If you are perceived to be at greater risk of default or bad debt, that will be reflected in the amount of interest that is charged on your account. Obviously it could be argued that this is counterproductive because additional interest heaped on those already less likely to pay makes it even harder for them to makes ends meet. However, credit card issuers want to be able to offer the best available products to people with the lowest risk profile and therefore they can't force those with great credit scores to suffer because of bad debt elsewhere on their books.

How do I get the Best Starter Credit Card?

To get the best starter credit card you need to make sure you compare thoroughly. Often first credit cards will come with eye catching gimmicks like a choice of design (a fluffy animal or a national flag). Don't let these gimmicks distract you. If you have to get an account with a higher rate of interest than is ideal, the best thing you can try to do is minimise its use where possible. So look at the numbers more than the plastic itself. All issuers will report back to one of the reference agencies, so there isn't necessarily a benefit in picking one card over another, other than for the fact that it offers you the cheapest credit possible. Obviously it is always advisable to pay off your balance in full if you can, but at least if you can't you'll be minimising what you pay. Undertaking this kind of analysis is often easiest done using a credit card comparison website, which details the small print very clearly, so marketing tricks don't cloud your judgement.

Of course, if you do have a credit history, it's likely that you'll find other more suitable credit cards. If you've struggled with credit in the past you might be looking for a bad credit credit card. Conversely if you have an established credit score and a good salary, you'll find that premier credit cards offer some of the best perks available (like purchase protection insurance & concierge service).