Money and budgeting is never a fun topic. Everyone LOVES making money however, no one likes paying bills. Since I was 16 I began working at McDonalds. I was so excited to have money of my own to spend that I did not really save any of it. Being able to do all the things wanted to, when I wanted to felt amazing. Everything I did, I paid for and it felt good too not having to ask my parents for money! The only problem is, I never saved any of it. This hurt when it came time to graduate and go off to college. My first credit card was when I was 18. It was such a huge responsibility!! Also, I am not affiliated with any of the companies listed. I do not earn a commission by you reading this. I truly want to just help people with their finances!
My First Credit Card
I was fortunate enough to have parents that explained to me the responsibility of a credit card. A Credit card is a great thing to have because it builds your credit pretty easily, if you use it correctly. They are also dangerous to have, we will address that later. I got my first card at 18 years old from Wells Fargo and my second a little after that from Discover. The limit was the same on both at about $1,000 each. Both cards I liked but if you can try to get a card with cashback. Discover IT was the only one that I got cash back from and that was so helpful. Keep your limits low while you get the hang of the card itself. A low first limit also helps you make sure you don;t spend above your means.
So the most important thing my mom told me was as soon as you buy something with that card, go and pay it off!! I think this is where most people make mistakes. I say this because it is easy to forget how much you spent and since the money doesn’t leave your account you could spend more than you have. If you don’t want to pay it every time you make a purchase then at least write down how much you spent or take that money out of your account. If you write it down make sure it is somewhere you will see it EVERYDAY! This will be useless to you if you don’t. This allows you to keep a good idea of how much you spent and keeps from carrying balances. When it comes time to pay the credit card put the money back into your account and immediately pay it!
The way credit cards work is they send you statements so purchases you made in July will be billed to you in August. So if you did not pay as you went then you have until the due date on your statement to pay. If you don’t, the ugly interest starts piling up. Interest is your worst enemy and you want to avoid it like the plague. It makes it harder to pay off your balance and this is how banks make their money. Banks make money from credit cards by you paying interest. Don’t pay them your hard earned money!
Have a Goal
When you get your credit card have a goal for yourself. By this I mean use it only for one kind of purchase. When I got my Wells Fargo card I used it only for gas. This held me accountable and kept me from using it on things I either did not need or couldn’t afford. For my discover IT card I used it for the big purchases like textbooks or groceries. Another reason why a cash back credit card is good is because you can get more cash back on gas and groceries. Discover runs promotions and they offer 5% cashback for different categories. Another amazing upside to cashback is you can use it the month after you used your card for a purchase. This also means you can apply that cashback to the balance you owe. How cool is that?!
I feel it is important for me to say this because having a credit card is serious responsibility. If you cannot trust yourself to not go over board and be diligent, I suggest you wait on getting a card. Late payments and high balances on your cards will bring your credit score down. When you get your card you will get a limit, it is so important that if you have to carry a balance on your card, make sure it’s less than 30%. High balances are a negative factor when assessing credit.
I always made sure to pay it off at the end of the month. Sometimes I would even pay the balance the next day. Now every card is different! Some will allow you to pay right away while others will make you wait until it posts.
Another HUGE thing is to pay it off on time! Late payments happen, we are all human, but try to avoid it! I set calendar events for when my credit card payments are due because it’s an easy reminder. We all have a phone with a calendar so why not use it?
Hard Work Pays Off
At the age of 20, I was able to purchase a brand new car with my husband( boyfriend at the time). We both had worked hard on our credit and we traded in his car to help with the down payment. Being so young we never even thought we had a chance. This was apparent because we were looking at this vehicle for almost twenty minutes before anyone even came to approach us. If you have ever been to a dealership before, you are lucky to get five minutes before someone is coming up to you. We were approached and the process of us buying the vehicle started.
We were weary of all the additives they offer because most of the time you do not need the extra coverage. The only thing we decided to buy coverage for was the extra warranty. With our age and good credit, we were both hopeful about getting the car but we had expected a high interest rate. The offer was shocking! We were offered a 2.9% interest rate! This was the first car we had ever bought and on top of that we were only 20 years old!
Building credit takes hard work and discipline. Credit will not just be given to you, it is earned. You have to show companies that you are a good candidate and will pay back what you owe.
Resources I Used
On top of keeping track of how much I spent and paying it off as soon as I could, I watched my credit like a hawk. The best website I have found to track your score is Credit Karma. Credit Karma let me keep up to date on how different factors affected my credit score as well as the score itself. I should warn you, credit karma does not show you your exact score. I have found that my score has always been 10-20 points higher than what they tell you. However, it is also possible for it to be lower so be aware.
Some credit card companies will also allow you free access to you FICO score. This is a score of your credit worthiness essentially. It allows companies to determine their risk and if they should extend credit to you. It is a good score to have as well! Discover is a company that allows you access to it for free which is awesome!
I also used an app called Mint which is great because they remind you of upcoming payments. They also allow you to set a budget and see where your money goes!
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