Business & Tech

Getting your first credit card? Here’s what you need to know

Credit cards

Duc Dao/Shutterstock

The first rule of credit cards is always pay down the balance by the end of the month.

For college students (and some high schoolers), it’s not too soon to be thinking about getting a credit card. Here are the basics you need to know:

What is a credit card?

A credit card allows you to take a short-term loan, which doesn’t accrue interest if you pay it off in a given billing cycle (around 30 days). You should ALWAYS pay off what you owe each month, because credit cards have horrible interest rates.

So why should you get a credit card?

Advertisement

Credit cards help you build your credit history, which will be important down the road for gettingauto and mortgage loans, and getting them at decent interest rates. They also help you get lower insurance premiums and meet the approval requirements for some utilities and residences. Just as important to many people, credit cards have great perks that offer cash and travel rewards.

Which credit card should you get?

Note: If you’re under 21, you’re going to need someone to cosign with you, unless you have a full-time job. And if you just want the perks and not the credit rating, you can add yourself to a friend or relative’s card and you’ll be able to benefit.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

If you have no credit history, go with a secured card. (You can check your credit history online through www.annualcreditreport.com). Secured cards are backed by a cash deposit equal to the card’s borrowing limit. If you’re a spendthrift and don’t think you can keep a good track of how much you’re spending versus how much you have, a secured card might be a good idea. If you have no credit history and can’t get a parent to cosign, you’ll have to start with a secured card.

Unsecured credit cards aren’t backed by a deposit and their spending limit is based on your income level and credit history. These are much better for rewards plans.

When it comes to rewards, get a plan that works for you: airline miles or hotel/travel perks if you travel a lot, groceries if you cook, and gas if you drive. Some travel credit cards include free checked baggage on flights and other perks that may be helpful. Try ones with sign-up bonuses. You can find out more about the best cards depending on what you want for rewards here at NerdWallet: https://www.nerdwallet.com/blog/top-credit-cards/nerdwallets-best-rewards-credit-cards/.

Advertisement

Other things to watch out for: If you are going to be traveling a lot to other countries, make sure you have a card without foreign transaction fees. If you expect to transfer balances, make sure you get a card without balance transfer fees.

As a start, check out cards like Discover it for Students, Barclaycard Rewards MasterCard, Capital One Quicksilver One Cash Rewards Credit Card, Bank of America Student Platinum Plus Visa, Discover Student More, and Citi Dividend Platinum Select Visa Card for College Students. Some, like Citi Forward, will reward you for paying on time and staying under the credit limit.

Here are some rules of the road:

1. The purpose of a credit card is your credit score and rewards. Always pay the monthly balance on time. Credit card debt is one of the worst forms of debt, with high interest rates and fat late fees. Miss a payment, and it can quickly spiral out of control.

2. If you’re even a little unsure about being able to pay the balance on time, don’t make a purchase with your credit card. It might be helpful to only charge one of your expenses (say just groceries) and make sure you pay that in full every month, before moving on to the next thing.

3. If you have already taken out debt, keep it under 30 percent of your credit limit and pay it back as soon as you can, before spending on anything fun or paying down other loans like mortgages and student debt. Never do it again.

4. Use automatic payments and online banking to make sure you’re on time with payments.

5. Never give out your credit card number by phone unless you made the call. Memorize your passwords and pins and always check out unusual activity.

6. Never take out cash advances. If you get a check in the mail from your credit card company encouraging you to use it to pay bills, don’t. It’s treated as a cash advance and interest is charged immediately. Shred them the second you receive them (so other people cannot steal them).

7. You get a free report from Equifax, Experian, and TransUnion (the three major credit bureaus) every year. Make sure there are no mistakes on those reports that can hurt your score.

8. And most importantly: Did I say never be late on monthly payments? Only get a credit card if you’re not using it for credit.

Isvari Mohan can be reached at voice@isvari.com. Follow her on Twitter @IsvariM.
Loading comments...
Real journalists. Real journalism. Subscribe to The Boston Globe today.
You're reading  1 of 5 free articles.
Get UNLIMITED access for only 99¢ per week Subscribe Now >
You're reading1 of 5 free articles.Keep scrolling to see more articles recomended for you Subscribe now
We hope you've enjoyed your 5 free articles.
Continue reading by subscribing to Globe.com for just 99¢.
 Already a member? Log in Home
Subscriber Log In

We hope you've enjoyed your 5 free articles'

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week
Marketing image of BostonGlobe.com
Marketing image of BostonGlobe.com
Already a subscriber?
Your city. Your stories. Your Globe.
Yours FREE for two weeks.
Enjoy free unlimited access to Globe.com for the next two weeks.
Limited time only - No credit card required!
BostonGlobe.com complimentary digital access has been provided to you, without a subscription, for free starting today and ending in 14 days. After the free trial period, your free BostonGlobe.com digital access will stop immediately unless you sign up for BostonGlobe.com digital subscription. Current print and digital subscribers are not eligible for the free trial.
Thanks & Welcome to Globe.com
You now have unlimited access for the next two weeks.
BostonGlobe.com complimentary digital access has been provided to you, without a subscription, for free starting today and ending in 14 days. After the free trial period, your free BostonGlobe.com digital access will stop immediately unless you sign up for BostonGlobe.com digital subscription. Current print and digital subscribers are not eligible for the free trial.