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My First Credit Card

5 Things I Wish Someone Told Me About My First Credit Card

My First Credit Card

The feeling of independence brings with it a lot of pride and accomplishment. Being on your own for the first time, making your own money, and making your own decisions is something to look forward to and be excited about. At the same time, it comes with responsibility. One area where many young adults (and older adults) tend to struggle is with the proper management of money and debt. With advertisements promoting short term gratification all around us, it's easy to think that credit cards are a quick solution when we're low on cash or the newest item on the market is calling our name. Below are some points to consider when shopping around for your first credit card. 

I could end up paying more than I originally spent (a lot more). Though it might feel like it when you're first starting out, a credit card is not free money; it's a loan that you need to pay back to the creditor. If you don't pay off the full amount each month, then you're charged interest. Annual Percentage Rate, or APR, is the cost of borrowing money, and it's compounded. This means that buying a $50 pair of shoes on your credit card today could end up costing you $100 or more down the road if you don't pay them off in a timely manner.

Not paying your bill on time hurts your credit score. Your credit card statements have a due date on them for a reason: you're expected to pay your payment on time. If you don't, then it could negatively impact your credit score. If you're more than 30 days late, most creditors report it to the credit bureaus, and the later you are, the more it impacts your credit. When your credit score is lowered, it makes it harder and more costly to get credit in the future. For example, your ability to purchase a car or house could be impacted. It can even impact your ability to secure an apartment or employment.

It's easier to get into debt than out of debt. Having a credit card to use at the tip of your fingers can be tempting, especially if you feel like you'd really like to have something but don't currently have the cash to pay for it. But you want to use your credit cards responsibly. Ask anyone who is in or has ever gotten out of debt, and they'll tell you it's much easier to get into debt than it is to get out of debt. Your debt to income ratio also impacts your credit worthiness and ability to get credit in the future, so be smart when using your credit card(s).

Not all credit cards are created equal. When applying for your first credit card, it can be easy to jump on the first offer presented to you. However, when you decide it's time for you to apply for a credit card, it's smart to shop around. Look for cards with the lowest interest rate and fees (annual, balance transfer, etc.), as some cards will end up costing you less for your specific circumstances when compared to others.

Cash should be the payment of choice, with few exceptions. With potential fees, interest and debt accumulation that can happen when using credit cards, cash is the best way to go when you can. Cash also helps you budget and know exactly how much you have to spend.

Having a credit card can feel and be liberating, but you want to be able to maintain that feeling without the chains of debt holding you down.