Having your first Credit Card may be one of the biggest moves towards a good credit history. But if you don’t have a good established credit history to enable a credit score, can you obtain a Credit Card? The reply is yes, but you are limited in the type of Credit Cards you can apply for.
Being aware of the advantages and disadvantages will only help to make a more informed decision. Let us have a look at the pros and cons of how to apply for a Credit Card without having a credit history.
Pros of applying for a Credit Card without a credit history
- Easy availability of credit: One of the crucial benefits of a Credit Card is that it makes credit available to you when you require it. Even if you have no credit history, a few banks provide beginner Credit Cards to help you create one.
- Opportunity to build credit history: A Credit Card lets you build a credit history from scratch. Consistent usage and timely payment of your Credit Card bills can help you develop a good credit history. This can prove to be helpful when you apply for Credit Card or other loans or credit products in the future.
- Financial flexibility: A Credit Card gives financial flexibility to help you make purchases even with no immediate availability of funds. In many Credit Cards, there is the facility of an interest-free period where the payment can be pending without having to pay extra, but you must clear the entire balance by the due date. Before you apply for a Credit Card, consider how its features can offer financial flexibility.
- Access to EMI facility: If you need to make a large purchase but don’t want to strain your budget, a Credit Card allows you to convert the expense into equated monthly instalments (EMIs). It is often easier than taking a personal loan.
Cons of applying for a Credit Card without a credit history
- Higher rates of interest: As you lack a credit history, lenders perceive you as a higher credit risk individual. Based on this information, you will probably be accepted for a Credit Card with increased interest rates. With a rolling balance, interest charges tend to add up fairly fast. Carrying a balance from month to month can result in interest charges adding up very quickly.
- Lesser credit amount: If you apply for Credit Card without having a credit history, its credit limit can be lower. This limits you from spending a lot or accumulating a high amount of debt, but it also means you cannot make large purchases.
- Impact on credit score: Since your Credit Card usage will impact your credit score, missed payments or excessive use of credit will have a negative impact. Building a solid credit profile requires a low credit usage percentage and timely payment of bills.
- Limited card options: Not all issuers of Credit Cards offer such cards to persons with no credit history. Your choices may be fewer, and some cards come with additional fees or stricter requirements for eligibility.
Final thoughts
If you are applying for a Credit Card without credit history it is important to learn about its pros and cons. Before you apply for a Credit Card, make sure to compare other options and understand the terms so that it aligns with your financial goals. With careful management, your first Credit Card will be the best foundation for your future.
