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When to Get a Credit Card, When to Use It & When to Cut It Up

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Love them or hate them, credit cards are a fact of financial life.

They can make tracking spending effortless.

Just as easily, they can blur the line between how much money you have and how much you can spend—plunging you into debt.

And even avoiding credit cards altogether is not without risk; you may need credit history to buy a home or lease an apartment, purchase insurance, or even get hired.

Hence these frequently-asked questions:

I’m going to give my opinions on each below, but I want to hear yours. Let us know: 1) When you got your first credit card and 2) How you use credit cards today. Share your thoughts now here.

When to Get Your First Credit Card

I realize this won’t apply to many of you who already have credit cards, or who have decided against them—so just skip ahead—but I get asked these questions a lot:

  • When should you get a credit card?
  • And how do you get your first credit card?

I got my first credit card when I was only 17 and still in high school. It came as part of a banking package at my family’s credit union. I’m pretty sure my parents were cosigners until I turned 18, at which point it became the sole signature on the account.

Getting a credit card this early had pros and cons, but in my case, it was mostly bad. Like lots of people who don’t know better, I quickly used my credit card as a way to “print money”, buying stuff I couldn’t afford and setting the stage for eight years of going deeper and deeper in debt. Cruelly, although I was going into debt, by making minimum payments on time, I was also building good credit at a very young age. By 18, I had my second credit card, and soon after my third—this one with a $11,000 credit limit (as a full-time college student with virtually no income). For these reasons, I recommend that you don’t get your first credit card until you’re either:

  • Financially independent of your parents or
  • About a year away from beginning full-time work.

Here’s why I see it this way:

First, credit card issuers aren’t allowed to issue credit cards to anybody under 21 without parental permission or proof that the applicant is financially independent. So for one, it’s just easier to wait until you’re 21 to get a credit card.

If your parents are supporting you through school or as you find work, they can (and should) make you an authorized user to make changes to their credit card account so that you don’t incur debts on your own you can’t pay. For money you may earn on your own, just stick with a debit card. The good news is, being an authorized user on a parents’ account can help you build credit yourself. Often times, parents want grown kids to have their own credit cards “for emergencies”, but there’s no reason this card can’t be the parents’ account as I described above.

So what if you’re earning your own income and no longer have access to the bank of mom and dad? Don’t focus on getting a credit card to finance an upcoming trip or furnishings for your new apartment, but do consider getting one to continue building a good credit history.

To reiterate, apply for a card either:

  • When you start making a decent income –or–
  • If you’re a full-time college student 21 or older, about a year before graduation. (That’ll give you time to build up some credit in case you need it for a lease or job application.)

HOW TO GET YOUR FIRST CREDIT CARD

As I mentioned above, your best first credit card is probably your parents’ card. As an authorized user on their account, you’ll begin building credit but will be subject to mom and dad’s scrutiny if your spending gets out of line (that’s a good thing). This will make it easier to get approved for the credit card of your choice when you’re ready for your own.

Note: Check your credit first. To qualify for most credit cards, you’ll need a credit score in the high 600s at least. CreditKarma is a free, no-strings-attached way to check in your credit score before applying.

Getting a Credit Card without Any Credit History

If you do not have any credit history, getting your first credit card can be a catch-22. You need one to build credit but you can’t get one without credit history.

Consider visiting a branch of the bank where you have a checking account. Talk to somebody in person and tell them you don’t have a credit history but want to start building one with a credit card. They may be able to get you started with a low-limit credit card or they may offer you a secured credit card—an account that requires you have cash in a bank account to cover any purchases you make with the card. (But, unlike a debit card, these accounts do build your credit.) And, in most cases, you can ask your bank to upgrade your account after a year or so of responsible usage.

Recommended “No Credit” Credit Cards

Alternatively, you can apply for a secured credit card.

These cards are designed for applicants building credit and require a security deposit before you begin using the card. After a year or so of responsible use, you’ll get the deposit back and can upgrade to a regular “unsecured” credit card.

Beware Really Bad Offers!

Whatever you do, avoid other Websites advertising cards designed for people with no credit or bad credit. Most of them are incredible rip offs with multi-hundred dollar fees, misleading claims, and terrible customer service.

When to Use Credit Cards

When it comes to how we use our credit cards, we’re all unique.

Some people use one card for virtually everything they buy. Others only use credit cards to buy big ticket items. Others buy different things with different cards, hoping to maximize the rewards they can earn. Others use whatever credit card “has room on it” (a sure sign you need a trip to the financial emergency room).

My wife and I have one credit card we use for virtually everything we buy. Our checking account pays the balance—in full—automatically every month. She and I each have another credit card: Hers she uses for occasional purchases she makes with “non-joint” money, mine I use for tax-deductible expenses relating to this blog and business travel for which I’m reimbursed. That’s it. We have a few other cards that are open but we don’t carry in our wallets. There’s little point to closing them because open, unused credit cards help our credit scores.

In most cases, I recommend a similar strategy. Carry two credit cards: One as a backup, and one for literally almost everything else. This lets you easily track spending and get one percent or more back on everything you buy. The caveat, of course, is that you should pay that card off in full every month, no exceptions.

If you choose to carry a balance and pay it off over a few months, whatever. It’s playing with fire and, depending on your interest rate, it may be expensive. But if you think you know what you’re doing, I won’t stop you. If you get in any deeper than that, however, it may be time to stop using credit cards (see below).

WHAT ABOUT 0% APRs?

As you probably know, you can get a new credit card that won’t charge you interest for six months or a year on new purchases. If you’ve got your finances in order and your head about you, I don’t see anything wrong with taking advantage of this to finance a big purchase with no interest.

But, personally, I would only do this if:

  • I had cash in the bank to pay off the balance at will.
  • I was prepared to be vigilant in repaying the card on time each month and in full before the end of the introductory period (to avoid inadvertent fees and interest).

When NOT to use Credit Cards

I can think of three situations in which you should stop using credit cards:

Reason #1: You’re in credit card debt over your head, so you absolutely should NOT use credit cards to make new purchases until you’re out of debt. Freeze ‘em, cut ‘em up, or cancel them outright if you have to. But you must learn to spend without them so you can focus your free dollars on paying off the debt you already have.

Reason #2: You occasionally can’t pay your balance because you spent too much last month. Consider stopping using credit cards and sticking with debit cards. Once you’re in a slightly more stable financial position (for example, you have a few months’ expenses worth of emergency savings and a 2-3 week’s pay cash buffer in the bank, you may consider carefully using credit cards again.

Reason #3: You otherwise know that you’ll use credit cards as a license to spend more than you have. Some people are alcoholics, others can drink in moderation. Likewise, some people can’t use credit the way most people do. If you suspect this about yourself, stay away from credit cards, and consider working with a counselor to address the reasons behind the behavior—this isn’t a financial problem so much as a psychological one.

What do you think? When did you get your first credit card? In hindsight, would you do it the same way again? If you feel strongly about how you use credit cards (or the fact that you don’t use them at all), feel free to share why as well!

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. I got my first credit card at 18 right before I graduated high school. It came in conjunction with my checking account. It only had a $500 limit but it allowed me to be able to pay for books, gas, and the few other necessities I was responsible for without having to run up large bills. I use my credit card perhaps too much now though. I’m never sure whether to use my credit card or my debit card on purchases. I have the money in the bank to do either but I have it in my head that using my credit card is better because it will help build my credit. Right now, I am 21 and getting ready to graduate college. I’m looking to get a new credit card with a higher limit and more benefits like cash back rather than rewards points that I cannot keep up with 90% of the time.

  2. Arthur P. says:

    David, great cartoon!!

    Credit cards can be a great tool, but only if you have full time income. That was my problem.

    I got my first credit card through the credit union I work at, with a great 3.99% for the first 6 months. It was the beginning of my fall into the pit of debt slavery. As and employee, I got a $5000 limit and started using it up. I racked up a nice balance and after realizing how much in interest I would pay now that the APR was 11%, I got a signature loan to pay the balance off and set myself up for paying the debt down.
    That’s when I should have put the card far far away, but didn’t.

    By then, I was used to being able to buy anything I wanted, when I wanted it. So, I kept using my credit card, making minimum payments while the rest of my part-time paycheck was covering the loan.

    I wouldn’t do it the same way, now that I know what being in debt really is. You become a slave to your creditors, your employer, and to yourself.

    I wouldn’t advise anyone to get a card before they hit their 20’s. When you do, make sure you get a card that offers legitimate rewards program, and do pay most of it off each month. And that, of course, means buying only what you need, or can afford to buy with cash.

  3. Kristen M says:

    I am 24 years old and just got my first credit card a few months ago. I only use it for gas and groceries but I make sure that I can pay most of it off every billing cycle.

  4. I got my first credit card at 17 too. And would probably do the same thing, it was great practice for 6 months before I headed across the country for college. Where I definitely needed a credit card in case of emergencies.

  5. I got my first credit card at 21 — about a month after I graduated college. I paid it off quickly at first, but at some point, it got away from me and before I knew it, I owed $3,500. I wish I would have built up more savings before I got a credit card, but I do think I learned a valuable lesson from getting into debt in the first place.

    I also loved the cartoon, too. :)

  6. As usual, great advice. I’m in my late 20s and have never had a credit card; getting one had been my next goal, but I’m sort of in that catch-22 phase, even still. This post has definitely helped. Thanks!

  7. David Weliver says:

    Glad a couple of you liked the cartoon. Occasionally I can’t resist including one. Perhaps all all the doodling I did in school will pay off :)

  8. I got my first credit card in high school. I was put on my parents card for emergencys. The first card I got in my name was at 18 on my way to college. I always paid my bill in full and now I have about 6 credit cards to maximize the value of points. I have an AMEX Green Card, Chase Sapphire Preferred and Amex Blue Cash as my main rotation. I pay them all off in full and love the benefits I get from paying everything I can with Credit Cards.

  9. I got my first credit card before my junior year in college. I did it for rewards at first, but after my parents started having trouble covering all of my college expenses I started having to carry a balance (disappointing since I worked many many jobs while in school). My goal when I graduated was to pay it off by the end of the summer, so I sucked it up and worked and put a strict 1/3 of my paycheck towards the balance until it was paid. I don’t regret using it because I never used it for things I didn’t need. I still don’t have a full-time income though I’m over a year out of undergrad. I have a few credit cards, one of which is providing us with a stellar discount for our honeymoon. I think if you are smart you can use them to your advantage, but you have to know your limits as far as being responsible. I never buy things with the credit card unless I have the cash in my account to pay for it.

  10. I got my first card at 16 and used it mostly for gas and occasional purchases. It had a very low limit and I’m sure my parents were cosigners.

    Now I use one for every purchase I can. I use a 1.25% cash back rewards card for most of the purchases and use a Discover for purchases in whatever 5% cash back category they have going at the time. I always pay the balance in full each month, and I end up with a few hundred dollars of rewards each year.

  11. The Oil Barron In Training says:

    I got my first card when I was 18. It was an AmEx Blue for students and had a $500 limit. At the time I was working at a bank and had proof of income. My job also made me painfully aware of the pitfalls that come with credit cards. I used it solely to build credit. I would only buy gas on the card and made sure to pay it off every month. Pay day was what I called my financial day. Every time I got paid, I would pay my card off on the same day, it was just an easy way to remember.

    Now that I am 2 years into my career, I have an AmEx Gold card with no set limit. I use my card for absolutely everything I can. I am naturally a saver, so I don’t have problems with racking up charges. By putting everything on it, I can easily track all of my purchases. Plus, I build up enough points to more than make the annual fee worth it. I also have a Corporate AmEx that I get to collect points on and combine with my personal points.

    My theory is that you should match your credit card situation to your spending habits. If you are a compulsive spender, then you should get a credit card with a low limit, that you know you can easily pay off every month. If you watch your money carefully, then you are probably good to get a big credit card. You just need to limit your risk by being truthful about your habits and vigilant with your money.

  12. I applied for my first card when buying my laptop/electronics for college, so I had just turned 18. Best Buy offered me a $2,300 limit on the card (my dad signed on as a guarantor, allowing me some wiggle room with the limit on a first-timer card), which was more than enough to cover the laptop, software, accessories, and insurance. After all was said and done, I had practically maxed out my first card walking out the door, which wasn’t ideal.

    After paying off the card (interest free for 18 months on purchases of $500 or more) in less than a year, I had built up my credit enough to apply for my bank’s student credit card. I received this without much hassle, and the card has a limit of $2,000, which I hardly ever use, is paid off in full each month if used, and is most definitely my “back-up” card.

    I recently (January, 2011) applied for the AmEx Zync card, which is my go-to card for any and all incurred expenses. It’s incredibly easy to track my spending, and has no pre-set spending limit, but is somewhere in the vicinity of $10,000, I believe. Frankly, having a card that needs to be payed off in full each month limits my spending, and I really think twice before every expenditure. I’m ashamed to admit that I play a little game with myself to see how low I can go with my spending each month, but this goes to hell when summer comes around, as I end up paying for rent, groceries, and utilities, something which I’m not used to, as a college student living in the dorms (yes, I know… welcome to the real world).

  13. I’m 22 and I do not have a credit card which I am glad for. I live at home with my parents, I’m a full time student but I don’t have plans to graduate for a few more years (late bloomer in the college department), I never have a steady income and I’m a relatively impulsive shopper when I do. I’m lucky to say that I have under $5,000 in student loans and hope to keep it that way with the use of as many scholarships and grants as I can.

    I watched my sister and her husband fall into severe debt after relying on credit cards to get them through their first few years of marriage and parenthood. The result was disastrous but they are finally getting things turned around, paid off, and there credit is slowly starting to rise. They have been my biggest warning to to not take credit cards lightly.

    I’m hoping to get a steady job so that I can move out on my own (even if it’s into a house with 40 roommates) simply because while living with Mom & Dad is financially nice, I am a big girl and it’s too easy for all involved to act like I’m still in high school. After a year of successfully living financially solid and sticking to a budget and building a savings cushion, then I can get a credit card to use on small stuff. And if at any moment I start to lose control then that card will have an untimely meeting with the scissors and I’ll have to go back to relying on what I know I have.

  14. Hi, I am 18 and at the moment I do not have a credit card. I have been thinking about getting one to build my credit for months now but I want to make sure I am completely ready for this kind of responsibility. I have had my part time job for a little under a year, ever since my first check my savings account has never been below $100 (for the past months it has stayed around $500 which is good for an 18yr old). I am a full time student, I maintain good grades (striving for the A) so I dont think i would struggle with a credit card. I pay my own cell phone bill, and insurance. Also everything else I want and need i have to buy (gas,food,netflix,xboxlive,clothes, toiletries… EVERYTHING). By paying for everything own my own I know money doesnt grow on trees and I know debt is a big issue (cousin obsessive with loan companies). I would treat the credit card just like my debit card. Ijust want to build my credit so when I am out of school with a steady job in my major I can afford my dream home, so do you think it would be okay for me to get a limited credit card or should I wait a few years?

  15. Very, very insightful, I just recently graduated high school, and while living under my parents roof, they made sure that anything i wanted, it was paid for with cash. Anything that had to do with loans, credit, etc they made me stay away from. I joined the military one year later and was finally self-sufficient and realized i couldn’t do anything without credit! I got my first credit card yesterday, and I am looking forward to building credit. Thanks for the advice, very helpful.

  16. Thanks for the advice! I have a question about how paying off credit cards affects a credit score. We pay our credit card off every month, but always make payments through out the month (2-3 per month). Often, when the statement closes for the month, we have no balance because it is already paid off. Will the credit bureau see this as usage? Is this keeping us from building our score?