Friday, June 12, 2015

Credit Cards: A Necessary Evil!



This email popped up from the Credit Card Insider team just as I was having a conversation about summer jobs with my 19 year old. They asked me if I would be interested in writing a post about advising college students/ fresh graduates about credit cards & good practice.

Now, both my teens will tell you that I absolutely love advising, only, they don’t seem to agree on the term used, I think they would rather call it “lecturing” and immediately turn their ears off. (How is that humanly possible, anyway?) Naturally, I immediately shot back an answer to the email, “Serendipitous!” I said, “I would love to.”

If you are a recent college graduate and are trying to stare down a humongous college loan balance or if you are still in college, and you receive a lovely (and tempting) welcome letter from a credit card company every other day, or you are one of those lucky ducks whose parents paid for college but are out on your own now, here are my thoughts.

Get A Job:

Really, get a job- any job! If it’s a job at your college library, stacking books or if it is at a local fast food joint, or if someone is looking for a tutor in a subject you are rock at- take it! Getting a job & holding it down is a self-esteem booster like none other. And having money trickle into your bank account? That’s an awesome feeling, as long as you remember that this first job is not going to be your career for the rest of your life! We have a trio of brothers in our neighborhood who mow our lawn for $30 a pop or $250 for the whole season, and I believe they have 45 homes on their route.

Get A Credit Card:
     
     It’s truly scary how important your “credit” is these days. Even your landlord or your cell phone company will check your credit score to determine your eligibility. The best time to start building credit is while you are still in school. How is your credit score determined? Many things go into that but your credit history is most important. The best way to acquire credit history is to get a credit card.




    How To Get A Credit Card:
     
     Can you ask your parents to be authorized user on your credit card? If yes, you should. If they cannot or will not, and there is no one else with a proven credit history who can be an authorized user on your credit card, apply on your own. You can apply for a credit card on your own only if you have proof of income. If you do have a job, it is better to apply for a student credit card, as these may have lower credit requirements and low limits. When you get the card, use it very, very sparingly.  Don’t ever carry a balance, this way you will never pay a penny in interest but will build a credit history. The Credit Card Insider has some great tips for students applying for credit cards here
   

     Be Responsible About Your Credit: 
     Like I said earlier, do get a card but use it sparingly and always pay off the balance from month to month. If you do this for at least a year, you are on your way to building a good credit score. This means you will have to be responsible and know what your balance on your card is, do not exceed the spending limit and I can’t say this enough, pay off the balance every month. If you exceed your limit or take cash out on a credit card, be aware of the fees involved and that you will have to pay the fees in addition to the balance. Don’t forget, pay all your other bills on time as well.






Be Aware of Annual Fees:

The only time paying annual fees on a credit card makes sense is when you cannot get a   credit card otherwise. If there is an annual fee and a high interest rate on the card, it would be better not to get the card. Get a credit card that have rewards for spending but don’t charge you a dime.


Protect Your Identity:
     
     Do not give your Social Security Number and other private information on an un-secure website or in the open to an unknown person. Make sure the person you are talking to is indeed the authorized representative of the card company.

Do not apply for many credit cards at the same time. This will actually lower your credit   score or worse even raise a red flag. Do not agree to be a co-signer on a card for a friend/ room-mate. If the friend/ room-mate is not responsible about their credit, you will be at risk.

 It seems like it was just yesterday that my husband & I were proud owners of our first credit card which we had to get in order to establish our credit history. But we have come a long way now and I am proud to share these tips with you to get you started on your path to good credit history. 

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As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com.