Which of the following should be avoided for an initial credit card?

• A. Annual fees.
• B. Very low credit limit.
• C. No annual fee.
• D. A long balance transfer promotion.

Answer: (A)

When you’re starting to build credit, you want to keep costs low while you establish a reliable payment history. Annual fees are ongoing charges just for having the card, and they don’t provide immediate value or protection for a beginner. This makes them a poor fit for an initial card, since every dollar spent on the annual fee reduces the net benefit you get from using the card responsibly.

A very low credit limit can complicate things by pushing your utilization ratio higher whenever you use the card, which can momentarily dent your score even if you pay on time. No annual fee is actually a plus, keeping costs simple. A long balance transfer promotion can be helpful later if you have existing debt to manage, but it’s not a primary factor for choosing your first card.