With my first job came my first debit card at 16, and it was a big deal. Instead of buying McDonald’s once a month with whatever leftover birthday money I could scrounge up, I could buy McDonald’s once a week with metaphysical money! It taught me how to save, and keep track of my spending and income, but now, as a college student, I have to deal with the next step of managing money: credit cards.
Having a credit card and consistently paying the bill is a huge responsibility. On one hand, having access to more money can help you make bigger purchases, or take some of the burden off of your weekly expenses. On the other hand, failing to make payments has consequences that can take a lifetime to make up for. So when is the right time for you to open your first credit card? Well, there’s quite a few factors to take into consideration.
What Is A Credit Score, And Why Is It Important?
Jason Steele, the director for credit card content at Money.com, puts it in simple terms: “A credit score is basically when they take your credit history and they put it through a formula and it comes up with one number, and that number is supposed to represent your ability or the likelihood that you’ll pay back a loan,” he tells Her Campus. “With credit scores, any person or computer that is deciding whether or not to give you a loan just has to look at that score. College students can relate to that, it’s like a grade.”
Banks and other institutions require a credit history when applying for a credit card or a loan, so if you plan on buying a car in the near future, you’re going to need a credit history. Your credit score tells lenders how reliable you are, and typically falls within the range of 300-850. Generally, the smaller your debts, and the faster you pay them off, the better your score is.
If you’re going to apply for a credit card, make sure you go in knowing how you’re going to prove that you can pay for it without a credit history. Without any credit history, this will probably require you to provide proof of income or to have a cosigner — somebody who does have good credit that can vouch for you, like a parent. If you default on your loan, your cosigner is legally responsible to pay it for you, so they also need to have a decent credit score and history.
Keep in mind that getting rejected for a credit card application will actually hurt your credit score, starting a whole cycle of you being unable to get a loan because you don’t have credit because your application got rejected. So the question stands: is now the right time for you to open one?
Using A Credit Card Should Help You Build Your Credit
Just having a credit card alone doesn’t help your credit score. You have to actively use it, and make your payments in full on a monthly basis. As long as you do, your credit score should rise (though if you have unpaid medical debts or debts in collections, those could prevent your score from increasing, even if you’re being responsible with your card). Just make sure that you’re only spending what you know you can afford.
According to Steele, the best time for a college student to open their first credit card is “when they feel like they are able to handle credit responsibly. By that, I mean pay your bills on time and avoid debt,” he advises. “If you feel like that’s something you’re able to do, then you’re ready to enjoy what I like to call the most secure and convenient method of payment there is.”
One way to stay on top of that is to treat your credit card like your debit card: don’t make the purchase on credit if you wouldn’t make it without it. Pay your credit card down each time you make a purchase, so you don’t forget to pay it before the due date. Or, create a budgeting spreadsheet so you can track how much is in your checking and savings accounts versus how much you’re charging.
But, You Risk Driving Your Debt Up
Your score will dip when you apply to open your new credit card, and it’ll drop if you fail to pay the full amount owed each month. When you open your new card, one of the biggest factors to look into will be the card’s annual percentage rate. The APR is the interest you’re charged over a full year, so if your card has a 24% APR, you’ll be charged 2% on any owed amount you allow to roll over each month. Some credit cards also charge additional fees if you don’t pay a minimum amount each month.
If you’re not paying your full amount each month, credit card debt can build up fast, especially with a high APR. You probably already owe thousands of dollars to your university, government, or private institutions, so it’s important to do the math and figure out if you can afford to pay off a credit card on top of that. Choosing a low-limit credit card and finding the lowest APR you can is the first step if you’re nervous about rollover.
“If you’re still getting your footing, you’re new to paying your bills, and you don’t want to take on another bill, then it might be too early [to open a credit card],” Steele warns. “If you’re having trouble paying all your current bills, [such] as rent, cell phones, or streaming services — or whatever bills you have — if that’s difficult for you, then it’s probably not a good time to get a credit card.”
Be Careful About Choosing The Right Card
Credit card commercials love to talk about their “special perks,” then throw out a bunch of buzzwords like I’m supposed to know what cash back is. No, high school did not teach these things. But I can!
Cash back is when a company returns a portion of what you spent at a particular location. For example, your credit card might give you 2% cash back when you fill up on gas from Shell, usually redeemable to apply to your credit card bill or transfer to your savings. Other cards may give you points, which can usually be redeemed for anything from gas cards to restaurant vouchers and, in some cases, actual cash.
You might be more interested in flight miles if you’re from Oregon but going to school in New York. Airline credit cards give you a certain number of points for every dollar you spend on flights and, sometimes, other expenses, too. Once you rack up enough points you can cash them in for future flights. If this appeals to you, check the options your preferred airline offers. You may be flying a lot, but probably aren’t earning points if you’re booking a Delta flight with your Southwest card, so choose carefully.
That said, Steele tells Her Campus that perks should not be the priority when it comes to choosing the right card. “I would caution students to not focus on rewards. The point, whether you’re in college or getting your first credit card, [is that] it is more important to manage it responsibly than it is to earn a small amount of cash back,” he says. “You never want to go into debt or make late payments.”
Steele also mentioned one way to make your life easier: choosing a card from your regular bank. “One of the best recommendations I have is to get a credit card from the same bank or credit union that you have your checking or savings account with,” he says. “That way, you only have one application to login to to check your balance, you can make a payment directly from one account to another (it’s not from one institution to another), and that makes it a lot easier to manage.”
Ultimately, almost no adult can get away with never having a credit card. They make it easier to buy a house, get a car and even pay for your own future child’s college, but they can also be dangerous if you don’t use them smartly. Take adulthood one step at a time. Navigating credit cards is hard, but would be a lot harder without a job, possible cosigner, or plan to manage existing debt. The time might not be right for you just yet, but only you can decide.
Jason Steele, Credit Card and Travel Rewards Expert and CardCon Producer