I don’t know about y’all but as a kid, I thought credit cards were magical. My parents always pulled them out for big purchases which almost always meant bringing something amazing home. Whether it was my Easy Bake oven or the new flat screen TV, credit cards = new shiny toy for me to enjoy. And then, my dreams were crushed. In 2009, one of my favorite romantic comedies, Confessions of A Shopaholic was released and the shiny view I had of credit cards was smeared.
I definitely was nowhere near waltzing into Prada, Chanel, or Manolo or living in New York City [I was in the 7th grade], but the themes of growing up and being responsible and knowing your limits were some #relatable content. Today, we’re gonna chat about credit cards: why I’m glad I got one while I was in college, the easy traps you’ll find yourself getting into, and how I’m getting my balance under control!
This is the second installment of “I’m Tired of Pretending…” where I tackle the random things I’ve come across as a young twenty-something with absolutely no clue on how to proceed [usually my parents or Google have helped me solve it]. Budgeting and credit are those obvious big-ticket items that aren’t ever discussed until you’re applying for your first apartment or buying a car. And then it’s too late and you’re crying to your mom about how the last 12 years of schooling were a huge waste of time.
Anyway, we’re gonna talk about the different types of credit cards and which one might be best for you. I’ll break down common credit card lingo because let’s be honest everyone needs a refresher on these things. Lastly, I’ve been reading up about the best times to use your credit cards and easy traps you’ll be tempted to fall into!
Now, let’s get into it!
Note: I am not a financial professional. It has been highly requested that I talk about more topics that are overwhelming at this stage of life, and getting my first credit card was stressful. I would always recommend reading up from a variety of sources before making any big financial decisions.
Common CC Lingo
APR
Annual Percentage Rate (n.) – This is the interest rate you’ll pay on your balance. It can, generally, be avoided if you pay your monthly balance in full. Caution: sometimes there is an introductory APR that will change after a limited time. Be sure to read all the fine print!
Annual Fee
If you can, avoid credit cards with an annual fee. This is simply a fee that’s charged by your credit card company for all the “benefits” of having an account opened with them.
FICO Score
The FICO score is your credit score. The three-digit number that will determine whether you can get loans and how much your house will eventually end up costing you. This number is generated from a lot of different factors like how much debt you’ve incurred in total and your payment history for paying this debt back. It’s one of the main reasons I recommend that you even get a credit card. If you have a timely payment schedule and never default on your balance, you’ll build good credit.
Cash Back
A ton of credit card companies have started to introduce rewards for account holders. You can choose from a range of benefits from cash back to rewards points that can be redeemed for fun goodies. You can also get a credit card that will give you double points or cash back on specific purchase types like travel and eating out. You’ll basically get a certain percentage, usually 1-2%, on all purchases that qualify. I save all my cash back for my travel funds. Spending money to get money is quite frankly the best thing I’ve ever heard.
Good Credit Cards for College Students and Twenty-Somethings
Discover it Secured
Building credit can be hard, but the Discover It Card allows you to establish a credit line with your own security deposit. This is a super interesting concept because you’ll effectively be borrowing from yourself and paying yourself back. The nice thing is that you can also earn cash back rewards on gas and food. Oh, and there’s no annual fee.
Chase Freedom Unlimited
This is a good card for my friends who are financially savvy and have already established a good line of credit. You’ll get 1.5% cash back on every single purchase [that future Europe fund is calling your name!]. There’s no annual fee and competitive APR.
Bank of America Travel Rewards Card
If you’re financially savvy and have a major case of wanderlust, the Bank of America Travel Rewards Card may be just the one for you. You earn 1.5 points per dollar to redeem for flights, hotels, and more. There’s no annual fee or foreign transaction fees and the APR range is competitive.
USAA Preferred Cash Rewards
If you’re in a military family and can get on the USAA train, I highly recommend. They have some of the most competitive APRs and no annual fees. I love getting Cash Back rewards and there are no restrictions. Also, no foreign transaction fees when you’re jet setting around the globe.
Wells Fargo College Cash Back Card
This card is specifically designed for my college pals out there. You’ll get a 0% introductory APR and no annual fee. Also, this is one of the few cards that will get you amazing 3% cash back as you build credit. It’s a great option if you need to buy a textbook or meal plan and you’re a little strapped for cash.
My Personal Tips for Handling Credit Cards
Do not build up a balance that you can’t pay off in full.
The alluring thing about credit cards is the sense of delay in payment. But, I would say if you can avoid the big “perk” of credit cards then do that. However, it’s a great way to make smart investment purchases like computers and apartment furniture. Save up as much as you can before making purchases to thwart the inevitable balance buildup.
Work your credit card payments into your budget.
If you are working to pay down your credit card balance, work it into your budget spreadsheet or template. I’d classify it as a bill. That way you’re keeping yourself accountable for making those payments every month.
Try to only use your credit card for certain purchases.
I’ve recently played around with only using my credit card on purchases over a certain threshold. I want to take advantage of my cash back reward ability as much as possible. I’m currently using a $50 minimum for credit card purchases. This will hopefully minimize the frivolous expenses that can pop up on your bill.
Okay, so I’m not a financial specialist, but I’ve read countless blogs and financial websites to make a lot of my own financial decisions.I’m currently on the hunt for a good finance/money/side hustle podcast that won’t put me to sleep. Drop it down in the comments if you have any suggestions. I’m really trying to work in investments and will probably be trying out Acorns soon. I am extremely stressed about tax season, but I’m sure I’ll figure that out too!
keep on keepin’ on,
