At the age of 18, I got my first credit card. I’ll be honest. I was a little scared to get one because I heard a lot of horror stories about college students getting credit cards. Also, I was afraid that I wouldn’t get approved for a credit card because I was a college student with no credit. To get over my fears, I came up with 9 ways that I wanted to prepare myself for my first credit. I went from being a college student with no credit to having a credit score of 760 if you go by FICO 8.
Know your reason(s) for getting a credit card
There are quite a few reasons to get a credit such as building credit, travel hacking, cash-backs, etc. Knowing why you are getting a credit card determines what card you should get. Also, it helps you stay focused on your priorities. For instance, if you want a credit card that rewards you cash, you know that you should find the credit card that will offer a great cashback program.
Learn about credit cards
Before getting a credit card, it’s important to know the basics. After all, a credit card can either cause a lot of stress in the form of credit card debt or aid in the form of getting a loan for a house in the future. This post from Financiallymint.com has a great credit card guide with a lot of helpful information.
Create Card Criteria
There are tons of credit cards out there. Being able to narrow down a to a list of a few credit cards that suit your needs is helpful and ensures that you don’t get a credit card that seemed promising but had a flaw. This goes back to the first step: why are you getting a credit card?
When I got my first credit card, I wanted a credit card I could get on my own, unsecured credit card, and would give me cash back. Knowing what I wanted made it easier for me to find the right credit card.
Here are some questions you should ask yourself:
-Do I want a credit card with zero interest for the first year?
-Will I be responsible for the credit card if I have a co-signer?
-Do I not want a card with cashback since I’ll send more with one?
Create a game plan
This all goes back to knowing why you want a credit card and understanding your personality. Having a game plan entails knowing if you only want to charge small reoccurring bills/ one-off items or all your spending. In addition, knowing that you will be able to pay off your credit card bill in full each month is a must.
For me, I decided to put all my spending on my credit card and pay off the balance each month. This made sure I got my cashback while not paying any interest. On the other hand, one of my older sisters prefers only buying small things on her credit card such as gas. There is no right or wrong answer.
Another thing you have to do is track your spending. When you get a credit card, it’s easier to spend more than you have. Knowing this, you should look out for an increase in the amount you’re spending. If that is happening, you should stop using your credit card until you solve the problem.
Some ways you keep track are using Mint, Personal Capital, or a spreadsheet. I just use a spreadsheet to keep track which offers more customization. Using a spending tracker like Mint and Personal Capital would be easier and prettier, but I still prefer using a spreadsheet. Just do what works for you!
Have a backup plan
People aren’t perfect. Have a plan in case you screw up. You should think of what you will do in case worst comes to worst. This is why having reserves is very important. I’ll admit it. There are some months where I have gone over the amount I want to spend. When this happens, I look back over my spending to make sure it doesn’t happen next month and use some of my reserves to pay off the balance in full.
What would you do if you didn’t have enough to pay off your credit card for the month? If your the first reaction is to have your parents pay for it, that would be a bad idea. That will set a bad habit. Instead, working on building up your stack of cash and creating a realistic plan to pay off your debt, while not using your credit card for a while would be a better option. This brings me to my next point.
Be able to bail yourself out! It’s easy to say that you’ll never go over your limits, but some months test even the strongest of will. This summer I had to pay for two classes (tuition, where I go, is pretty cheap, so I only spent a little over $1,000 for my classes and textbooks) which I had not budgeted for. My saving grace was my extra funds. This allowed me to know that my credit card bill will be paid in full.
For you, it might be getting laid off, having a medical emergency, or having to move unexpectedly. Whatever the reason, having reserves will help you have less stress and stay out of debt. To get started, check out this saving challenge!
In most cases, you should get the credit card only if means to pay the bill yourself. It’ll help teach you credit card management. Another plus is that spending the money will feel more real to you since you know that you will have to pay it back with your own money.
As students, we tend not to make enough money to get a regular credit card, so it’s tempting to make your parents co-signers. For those who might not know, a co-signer is someone who has signed up to be responsible for any purchases on the credit card and can use the credit card as well.
If you’re applying for a credit card made for college students, you should be able to get one on your own. You just need to make more than you spend (excluding student loans) and make enough income.
Put a tracking system in place
You need to know where your money really goes. How will you know if you are spending more thanks to your credit card if you don’t know how much you were spending before? Keeping track focuses you to learn if you are taking out more money than you are earning. By knowing this, you can adjust your spending. Tracking your finances also helps you create a realistic budget.
Check account regularly
Putting alerts on your credit card is a great first step, but checking your credit card account regularly is the best. Checking your account regularly will help you see that you’re on track to overspend or stay within your budget.
What do you think is the best way for someone to prepare for their first credit card?