Adulting

The Right Way to Use a Credit Card

As a 23 year old, I have a good amount of friends who do not have credit cards yet, or haven’t even thought about getting one.  So, I figured this would be a good topic to cover, since I’ve had one for 9 years now (not your average 20-something).  Through my personal experiences with applying, using them to cover things I couldn’t afford, getting out a credit card debt, and listening to many discussions about the topic, I have put together a great list on ways you should use a credit card.

 

  1.  Start ASAP.  A big part of your credit score is the Age of Accounts.  This is the average of how old all of your accounts are.  So getting a credit card or small loan as soon as you can (18!!) is a good idea.  However, I strongly advise that only responsible 18 year olds open a credit card.  If you’re someone who can be like, “ok, this credit card is only for gas money, Netflix account, coffee, etc.” than definitely get on opening an account.  If you’re someone who is going to max out the card the day you get it, than don’t.  It will hurt you A LOT more than it will help.  The first credit card I was able to get (approved for) through Discover, right after I graduated from High School.
  2. If you can’t pay it off, don’t charge it.  This is where people get into trouble with credit card debt.  This happened to me.  Senior year of college, i just couldn’t get by.  My parents don’t have money to give me, so i just would put it on the card and figured I’d deal with it when I could.  Yeah, this seems like any easy fix, but trust me–15-23% adds up quickly.  Only put on the card what you can pay off every month to avoid paying ridiculous amounts of interest.
  3. Set limits for yourself.  Set yourself up for success by laying down some ground rules.  “This credit card will only be used to purchase this, this, and this”.  For example I have a Bank of America card that I used to primarily charge Gas and Groceries.  It keeps it simple for me, plus I get 3% cash back of Gas and 2% back on Groceries.  But now that I am able to pay my card off every month, this is my go-to way to pay for most of my every day expenses.  I also have a Discover card, which I opened up right when I graduated high school.  I definitely recommend this to people who don’t yet have a credit card because you can easily get approved for it.  Right now, I only charge online purchases, especially Amazon because I can use my cash back towards my purchases.
  4. Find a card that will fit your needs.  Whether its cash back, points, building credit, or miles, there are plenty of credit cards out there that you can really “win” with.  Fly a lot?  Find a card that will get you the most miles based on your spending habits.  Just starting off and wont charge much to the card.  Find a Student credit card that you will get approved for and set you Netflix account up to it to build credit.  Want to make money for paying your card on time?  Find a card with great cash back bonuses on the stuff you already buy, like Gas and Amazon purchases.  On average, I rack up about $20 in cash back every 2 months.  May not be winning the lottery, but its a little something extra!

My biggest advice is a credit card is not free money!!!  If you use it like free money you will DESTROY your credit.  If you destroy your credit, you’re going to have a hell of a hard time trying to buy a car or a house, or even renting an apartment.  Having a credit card means you have to exercise a little self control, something I cannot teach.  You just have to have the will power to focus on your financial goals and use the credit card as a tool to get you where you want to go.

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