Credit cards? Should you get them and what do you need to know before you do?
Written by: Alex D.
To put it simply, yes, you should have a credit card at some point in your life, but when?
The right age.
Most sources say that between the ages of 18-21 is the right time, however some give a range and others say right at 18, the reasoning is because of credit score, and the way you build your credit score. If you start at a younger age, you can start you build up your credit score, which is vital for purchases like a vehicle or a loan for your house, which are very important things that you wouldn't want to have denied from you, and starting young can help you make your credit score better earlier in life, but could also make it worse if you aren't careful.
What you need to know about credit cards before you start using one.
First of all, you need to understand that a credit card isn't free money, which sounds like common sense, however some people don’t realize this and can end up in a ton of debt because they just see it as being able to buy anything they want. The issue with this beyond the debt is that credit card debt counts for 30% of your credit score, which as previously stated is very important if you want to buy things like cars. So what do i mean by it not being free money, all the money you spent with a credit card needs to be paid back after a certain amount of time, and if you don’t pay it back then your in debt, its simple but for some people who may not understand that or for those with horrible spending habits (most likely never got taught about budgeting) it can be a serious issue, but if you understand that and can get past that credit cards are very useful and you should have at least one.
How should you effectively use a credit card?
According to Business Insider “The important thing is to use your credit card as if it were a debit card” I believe this statement is very accurate, if you wouldn’t normally have the money to buy it (unless of course you're just wanting to buy it earlier because maybe you’ll have the money soon and want to get whatever item your buying sooner rather than later.) then don’t buy the item, otherwise when the time comes to pay back what you spent you wouldn't be able to pay it back, which leads to debt, and as previously stated credit card debt can be very harmful to your future.
Conclusion.
Overall, you should get a credit card when you're young, but you just need to be aware of the danger of using a credit card wrong, and the simple tip of using it more like a debit card instead of seeing it as free money should be enough to not get in debt. As far as building up a credit score goes, just buy things, things you can afford of course but just using a credit card should help your score, which is the importance behind starting so young, much like retiring and saving money, the sooner you start the more you’ll have later in life.
Slotnick, David E. “4 Reasons Why You Should Use a Credit Card Instead of a Debit Card.” Business Insider, Business Insider, 13 Dec. 2019, www.businessinsider.com/personal-finance/reasons-to-use-credit-cards-vs-debit-cards.
Irby, LaToya. “How Too Much Debt Could Be Affecting Your Credit Score.” The Balance, 29 Oct. 2020, www.thebalance.com/how-your-debt-affects-your-credit-score-960489.
DeMatteo, Megan. “Why It's Important to Open a Credit Card at Age 18.” CNBC, CNBC, 25 Nov. 2020, www.cnbc.com/select/whats-the-best-age-for-first-credit-card/.
This is particularly useful for most of us as we approach 18 years old and might not realize that we should start early. I'm just curious, if credit cards only account for 30% of our credit score, then what else goes into creating the credit score?
ReplyDeleteThis blog post challenged my original thinking, many people say that you should not get a credit card when you are young. In this post, it is said that the right time to get a credit card is between the ages of 18-21. Normally I would have thought that if you do not need to get a credit card you should not get one. I did agree with how Alex said that you should try looking at your credit card more like a debit card instead of free money, because I know personally it is easier to use a card to spend money than cash. One question I have is what happens if you get a credit card when you are young and missuse it? Would it have been worth getting the card?
ReplyDeleteThis is actually really useful, I didn't realize that there were benefits to starting early in terms of managing your credit score. Drew asked this already but I am actually curious: what else DOES that 30% count for? And is there a recommended amount that you will be able to pay back if you are purchasing OVER your credit card payment limit?
ReplyDeleteI found this very interesting to use your credit card like a debit card. I never thought this way but it seems like a really good idea since credit card debt counts for 30% of your credit score. If feel think if most Americans followed this we could slim down the 55% of Americans having credit card debt.
ReplyDeleteI think the advice in this post is great. Credit cards should be used like a debit card. Even though I had never really thought about it that way, I see that it is true. Additionally, the part about the credit score was really good advice. I never realized how important it was. Also, I didn't know debt makes up almost one third of your credit score. This is good information to keep in mind as we mature and become adults.
ReplyDeleteThis is a very intriguing post as it definitely brought more insight as to what are the needs for credit cards and how they are different from debit cards. I really enjoyed the concept that you brought in of when we need them,how we can use them effectively and the extra knowledge. All of the major talking points were very beneficial to my understanding of credit cards.
ReplyDeleteI never knew that the recommended age was around 18. I always knew it was important to build credit score earlier to help you with later purchases, but I always thought it would be more around 21. I find it interesting that many people end up in so much debt even though it seems like common sense they have to pay the money back. Do you think they just get caught up in the excitement of spending?
ReplyDeleteI always saw credit card as something you would use for bigger purchases, and recently had been thinking about are they even a need and why is a credit score so important? So this did bring some insight and helped me answer those few little questions I was wondering about. It still amazes me that people don't understand that it's not just free money and they have to pay it back yet are in so much debt from credit cards, it is crazy. Is this something they are aware of yet just don't care about being in debt or think that they can just keep putting it off? Or do they think they will have the money at the end of the month and find out they don't? I wonder what actually goes through their minds as they use their credit cards knowing they don't have the money.
ReplyDelete