Question: Hello frugal folks,
I have what I’m sure is a really basic question, but as a 19 year old college student who’s dumb as a rock about credit type stuff, I thought I’d ask you guys.
Right now I’m getting piles of credit card offers from bloodsucking companies offering me cards with ridiculous APR’s and sneaky fees. I always rip them up and toss them. Lately, however, I’ve been thinking of their major argument — basically they scream, “GET THIS NOW! BUILD YOUR CREDIT WHILE YOU HAVE THE CHANCE!”
Is this a valid reason to get a credit card now? I know the common pitfalls of having a credit card — spending more than you have, treating it like “play money,” and I can’t see myself doing either. I’m always careful with my money, rarely buying anything new for myself and shopping at thrift stores when I do. I would never make any major purchases with the card. I would probably make an occasional small purchase and set aside the cash to pay it off in full at the end of the month. Is this reasonable? Is it really that important to begin to build my credit already?
And if yes, where should I get my credit card? When I compare the APR’s of mine and my parents’ offers, there’s usually a difference of 10-15% I know that their established credit is huge factor in that discrepancy, but it seems that I could do better than what is being offered to me. I realize that if I plan to pay my bill off in full at the end of the month, the APR won’t matter as much, but I still want the best deal
I would appreciate any advice at all! As I said before my knowledge of this stuff is shaky at best.
Thanks so much,
Answer: I think it is hard to evaluate how you will use a card until you actually have one. I always *thought* I used my credit cards sensibly, I never made any purchase over $50 (unless it was for an airplane ticket or car repair). However, nickel and diming over a course of a decade led to about 10K in debt. Some of that was unavoidable (I had a car in college that hated me and broke down regularly), but most was just thinking along the lines of, “Well, the balance is already at $875, whats the difference if its $885?”.
I don’t necessarily regret getting a credit card in college. I do have outstanding credit (even though I couldn’t pay the balance, I could make at least the minimum payment..a creditor’s dream customer), my husband and I have never had a problem purchasing our cars or getting pre-approved for our home loan. I *do* regret letting the debt get so high and I *do* regret that it took me almost 10 years to get a clue and quit using a card to buy a lifestyle I thought I wanted but couldn’t afford. I’d really like to be a stay-at-home mom to my two young children, but will be working part time nights for the next 3 years or so due to my nickel and diming w/ credit cards.
That said, I have definately found my credit cards to be useful. Others have mentioned the benefits so I won’t repeat them. I wasn’t mature enough at 19 (and not even sure I am now..LOL) to differenciate between a “need” and a “want”..sometimes the area is a bit gray. Do I “need” a plane ticket to go home for Thanksgiving, or do I just “want” to go home for Thanksgiving? Do I “need” a new pair of jeans on sale for $15, or do I “want” to buy them because the deal is pretty good?
I think someone mentioned the idea of starting with a low limit..I’d go as low as $200 for the first 6 months, just to see how you do. If you find that you are not at all tempted to spend when you don’t absolutely have to and you pay the balance each month, then let them raise the limit to $500. If you establish good credit with the company, they should have no problem with raising the limit last minute should the need arise.
Again, if you do decide to get a card, be sure there is no annual fee. Also see if you can find a card that gives you at least a few days grace period around the due date. My card allows NO grace, if you are one day late, they slap you with a $29 late fee.. it doesn’t matter if you sent the payment 12 days earlier and the mail just happened to be slow. Too bad for you.
You might also consider getting an American Express card.. which is a charge card rather than a credit card (although they do have a credit card option which I believe they call “Blue”). If you opt for a charge card, you have to pay the balance each month, you don’t have a choice. I do believe there is an annual fee, but if you are at all concerned you might be a teeny bit tempted to spend more that you can pay monthly, the fee might be worth it to build your credit along with the other privileges, yet not have to worry about getting into debt.
Good luck!
Related posts:
- Does credit card balance affect credit ratings?
- Financial Advice for College Graduate – 401(k) vs. debt
- Credit Card Jumping
- Credit card vs loan question
- Credit Cards: MBNA vs. Citibank vs. AT&T
- best credit card airline
- Get him a CREDIT CARD!
- Credit card convenience check question
- Please help – I need to get my credit card debt under control
- Credit card balance transfer?
- Credit card “new balance”
- HELP: Buying a card with a credit card?