Credit cards were terrifying to me. My parents instilled in me the dangers of using them from my high school years and all through college. Many of my friends were using their family’s credit cards for purchasing clothes, food, and basically anything they wanted. My dad taught me early on that we only buy what we can afford at that moment. Anything purchased on credit has to be paid off in a timely manner. If you don’t have the funds for your purchase this month, most likely you will not have them next month either. In my eyes credit cards were like Kool-Aid … so delicious and fun to drink but so bad for your body. I didn’t have my own shiny card until this year. How did I survive? My dad let me use his account for emergencies ONLY. I was a cash only girl for 23 years basically, so navigating credit cards was foreign territory for me.
How do you choose a credit card? How do you get approved? What’s the rules on paying a credit card bill and establishing good credit? These were the thoughts racing through my head when I was considering opening up a line of credit. Remember the scene in the movie “Confessions of a Shopaholic” when she maxed out every credit card that she had? That’s what went through my head when I thought of credit cards.
Here’s what I’ve learned and a few tips and tricks to managing credits cards — the good, the bad and the ugly!
When should you get your first credit card?
You should get your first credit card when you have a steady income. For some, this means in high school or college. For me, I didn’t feel like I needed one until 2 years after graduating college. I still bought a laptop and paid for Invisalign, but I saved and made those big purchases using my debit card. I realized if I wanted to make bigger purchases/investments, I needed to build credit.
One of the main reasons people get credit cards is to build their credit score. It can be easy to build, but on the flip side it is easily destroyed if not managed well. So you have to live within your means before even applying for one.
What should I be looking for when “shopping” around for a first credit card?
With so many credit card choices, selecting the best one for your needs can be overwhelming. You can choose a Discover Card, Capital One, Target, Nebraska Furniture Mart, Victoria’s Secret and the list goes on and on. For a first time credit card user, building credit is the most important factor for having a credit card so select wisely.
Go simple with your first card. Choose a credit union or bank credit card rather than an individual store’s card. To begin with, it’s more universally accepted. The benefits included with a credit union/bank card versus a store card are WAY different. Sure you may save money at Target on your frequent visits or on a new piece of furniture at Nebraska Furniture Mart. However, upon looking at the big picture, you will receive those same savings by using a Discover card with it’s 1% cash back program on all purchases. It adds up. Having too many lines of credit open with multiple cards can hurt you down the road when purchasing a first home. Even if you don’t use the cards and they have zero balances, lenders see the open lines of credit as potentially risky. Multiple active accounts can make it more challenging to keep track of payment due dates and control your spending. Go simple.
Keep in mind, that the best credit cards are not for first-timer credit card users. They are meant for people who have established excellent lines of credit. This means those heavy cards with the cool designs can wait.
The biggest thing when searching for the right credit card is to research and compare interest rates. Don’t forget to make sure your card is accepted internationally. Some credit card companies charge additional rates for international use. I also prefer using a company that has a good online app to help me with my credit card needs.
What’s the best practice when using a credit card?
If you are trying to establish credit, start small. I recommend using your credit card on just groceries or gas. Pay off your bill that day or the same week. When you make it a habit to pay things off quickly, you shouldn’t have to worry too much about overspending. You’ll be able to trick your mind into thinking, “Will I be able to pay this off by the end of the week?”. You are using a credit card like it’s your debit card. You have to have the money or you don’t use it.
Once you feel more comfortable with your card, you can start introducing some bigger purchases to it. This could be a nice piece of furniture, a pricey gift for someone, or even a camera. Some of these purchases can’t be paid off that same week — which is fine and totally understandable. Have a plan to pay them off that month or within 2 months. It can be tempting to pay the bare minimum on the monthly statement, but I always recommend putting down a little more. If you are only paying the minimum, then you aren’t touching the balance due. You are spending your hard earned income on interest, not the principal.
What you don’t want to happen is your credit card statement number to just keep rising. The quicker you are able to pay things off in FULL, the better. The most important thing is that if you don’t trust yourself, HOLD OFF.
To learn more about what to consider before getting your first credit card, check out this informative article by NerdWallet.
I’m going to leave you with 6 Major Credit Card MISTAKES from Amy Fontinelle.
If you are doing any of these, it’s never too late to change your habit.
- Only paying the bare minimum on your balance
- Using credit cards for every day items
- Chasing credit card rewards
- Taking cash advances
- Using credit cards for medical expenses
- Ignoring your debt
Remember, balance is the key to life even when it comes to managing your income.
Until next time, Spread Kindness.