Your first credit card: how to get one and never pay interest

What issuers look at

When you apply for a first card, the issuer usually checks your credit report, your income and your existing obligations. With little or no history, income and a clean report carry most of the weight. Expect a modest limit at first; it tends to grow as you show a track record.

If you are under 21, federal law adds a step. The CFPB explains that credit card companies generally cannot issue a card to anyone under 21 unless the applicant can show an independent ability to pay or has a co-signer who is 21 or older and agrees to be responsible. A part-time job can count as independent income. Being added as an authorized user on a trusted family member's card is another route, as long as the card issuer reports authorized users to the credit bureaus.

Choosing a first card

Look past the marketing. For a first card, the features that matter are:

• No annual fee, or a fee low enough that it is clearly worth it.
• Reports to all three major credit bureaus, or the card does little for your credit.
• A clear path forward, such as a secured card that can graduate to an unsecured one.
• APR: it matters less if you never carry a balance, but a lower rate is a safety net for a bad month.

Rewards are a bonus, not a reason. A card that tempts you to spend more to earn points costs more than it pays.

The grace period: the free part of a credit card

Most cards give you a grace period: if you pay the full statement balance by the due date, you are not charged interest on purchases made during that billing cycle. Pay less than the full balance and you generally lose the grace period, so interest starts accruing on the balance and often on new purchases until you pay in full again.

A first-month setup

1. Set autopay for the full statement balance the day the account opens. Not the minimum: the full statement balance.
2. Choose one small, recurring bill to put on the card, and do not use the card for anything else for the first three months.
3. Turn on alerts for every transaction and for when the statement is ready.
4. Mark the statement date in your calendar; the balance on that date is usually what gets reported to the bureaus.
5. Keep the card at home if carrying it makes spending easier.

Habits that build credit

Payment history and how much of your limit you use are the two habits you control most. The CFPB notes that many experts recommend using less than 30 percent of your limit, and that people with the highest scores often use under 10 percent. You do not need to carry a balance to build credit: paying the full balance each month builds history and avoids interest.

After six months to a year of on-time payments, you may be offered a higher limit. Accepting it can lower your utilization, as long as your spending does not rise to match.

Mistakes that cost the most

• Paying only the minimum. It feels safe, but interest grows quickly and the balance barely moves.
• Cash advances. These usually carry a fee and start charging interest right away.
• Missing a payment. Late fees are one cost; a payment reported 30 or more days late can hurt your score for years.
• Opening several cards quickly. Each application can add a hard inquiry, and several new accounts make you look riskier.