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The 4 Most Important Factors to Consider When Choosing Your First Credit Card

I still remember my first credit card. I had just started my first co-op position in university, and I wanted to start building my credit. My first credit card was a student card and had a limit of $500. As soon as it arrived in the mail, I went out and bought a pair of rubber boots. It was January on the east coast, and waterproof footwear was a must.

I paid off that purchase, and every other purchase I made, which is good because that credit card came with a very high interest rate. I hadn’t considered the interest rate when I applied, in fact, I hadn’t considered much of anything about the credit card before I applied. This lack of research was a mistake.

Applying for your first credit card is a big deal. Your first credit card is often the first credit-building tool you’ll obtain, and how you treat that credit card will set the tone for how you use credit for your entire life.

Choosing the right credit card is important, and there are many factors to consider. Here are the four most important things to think about when applying for your first credit card.

What to look for in your first card?

1. Interest rate

As I mentioned above, the interest rate on my first student credit card was quite high. I hadn’t considered this when I first applied, but I should have. As a student, my expenses regularly exceeded my income. This imbalance meant that while I made my minimum payments every month, I often carried a balance for several months before my next co-op job started and I was able to pay the balance down to zero.

If this is your first time applying for a credit card, and there is a chance you might carry a balance from month to month, then the interest rate is the most important factor to consider when choosing a credit card. Just a few months of carrying a balance can cost you hundreds in interest charges, so the lower the interest rate on the credit card, the better.

As a side note, if you do need to carry a balance on your credit card, make sure you make your minimum monthly payment. Failure to make your monthly payment will result in a decreased credit score and in most cases an increase in your interest rate.

2. Annual fee

Some credit cards require you to pay an annual fee, which usually ranges between $99 to $150. Often, these credit cards are rewards credit cards (which we’ll go into in the next section) and the rewards you’ll earn outweigh the cost of the annual fee. To determine if this is the case, you’ll need to review the purpose of this credit card. Are you going to use this credit card for your everyday spending, and in that case, how much are you planning to spend per month?

If you are only using this credit card as a backup or to make occasional online purchases or booking travel, a credit card with no annual fee may be more worthwhile for you.

3. Rewards

Travel rewards credit cards and cash back credit cards are a popular way to earn rewards for spending money on a credit card. Travel rewards credit cards allow you to earn a certain volume of points per dollar spent, often with tiers of rewards for different categories. You can redeem these points for travel-related expenses including flights, hotels, and car rentals.

Cash back credit cards operate on the same principle, except cash back credit cards give you a percentage of your spending back, usually between 1% – 4%. There are often categories of spending that allow you to earn higher cash back, and your rewards are typically rewarded to you once per year or quarterly.

If you plan to use your first credit card for your everyday spending, then choosing a credit card with some rewards earning capability is a good way to maximize your spending. Just remember that the interest charged on your credit card for carrying a balance will wipe out any benefit from earning rewards, so never make purchases you can’t afford to pay off in the name of earning rewards or cash back – the math doesn’t work.

4. Income requirement

Finally, if this is your first credit card, the most limiting factor with regard to the credit cards you can apply for is most likely your income, as was the case for my first credit card. As a co-op student who only worked full-time four months out of the year, my small income relegated me to student credit cards only.
Most credit cards with robust rewards schemes and higher annual fees have a high minimum income requirement. When you start researching potential credit cards, stick to the credit cards that fall within your income range. To verify your income, most lenders will require two recent pay stubs, and possibly a letter from your employer.


Our top beginner credit cards picks

The American Express Cobalt Card has been named the best overall rewards credit card in Canada by Ratehub for three years in a row, and it should be at the top of your list to consider. This card offers great rewards and lots of perks like mobile device insurance, travel insurance coverage, and extras like American Express Front of the Line for advance access to the biggest shows. 


4.5 Ratehub rated

Best for Groceries & dining

First year reward

based on spending $2,200/mo after $156 annual fee

Earn rewards

1pt – 5pts / dollar earn rate

Welcome bonus

15,000 bonus points (a $150 value)

Annual fee


If you’re looking for a credit card that has no annual fee and offers flexible cash back rewards, a moderate interest rate, and no income requirement, the Tangerine Money-Back Credit Card is a great choice. 


4.5 Ratehub rated

Best for Flexible spending

First year reward

based on spending $2,200/mo after $0 annual fee

Earn rewards

0.5% – 10% earn rate

Welcome bonus


Annual fee


The Bottom Line

Credit cards can be an excellent way to establish a credit history and build a positive credit score – but they must be treated with respect. While choosing the right credit card is important, paying off the balance every month is crucial. Interest rates on credit cards are high, and interest charges can quickly wipe out any benefit from travel or cash back rewards. So choose your credit card wisely, and pay off your balance every month. If you follow these two rules, you’ll be well on your way to a great credit score and hundreds of dollars in rewards.


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