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.
Hence these frequently-asked questions:
- When should you get your first credit card? [Skip to answer]
- When should you use credit cards? [Skip to answer]
- When should you not? [Skip to answer]
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.
- If you’re a full-time student, a student credit card will be your best bet.
- If you have a full-time income, you should have your choice of the best credit cards available.
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).
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!