Knowing when to open a credit card and how to use it responsibly will prepare you for the many perks that credit cards can offer (while avoiding the potential pitfalls).
So, when should you get a credit card?
Short answer: When you’re over 18 and know you can use one responsibly.
Long answer: When you’re ready to start building credit, are looking for convenience and security in your finances, or want to get rewarded for purchases you know you’ll make anyway.
When Should I Open My First Credit Card?
Applying for your first credit card is a significant financial milestone. We’re talking major adult moment here!
It marks the beginning of your credit journey and helps you establish a credit history — an essential aspect of your financial profile that lenders use to evaluate your creditworthiness.
And there are some other compelling reasons to consider getting your first credit card, like insurance protection on purchases you make and the ability to earn cashback or rewards.
Here are four reasons to consider getting your first credit card.
1. You want to start building a credit history
Establishing a credit history is crucial, especially if you plan to make major financial decisions in the future, such as buying a home or a car. And you need to have credit to build a credit score — the sooner, the better, since the length of your history contributes to your score.
When you use your credit card responsibly by making timely payments and maintaining a low credit utilization, you demonstrate your ability to manage debt effectively.
This will make it easier for you to qualify for better interest rates, loan offers, and repayment terms when you apply for other lending products.
Some employers and landlords even take your credit score into account when reviewing your application. Having a bad credit score can even make the price of your insurance shoot up. Ouch!
Having trouble getting a credit card? Try a secured card, which is typically available for all customers, no matter their credit history. You'll just need to put down a refundable security deposit.
READ MORE: How To Build Credit from Scratch
2. You’re ready to learn financial responsibility
A credit card provides an opportunity to learn financial discipline. It’s important to manage your spending and pay off your balance by the due date. If not, your balance will be subject to interest, meaning you’ll end up paying more for a purchase than you need to.
Responsible money management is a skill that will serve you well throughout your life. The trick to getting the most out of your credit card is to educate yourself on how to use one responsibly before you open the account.
The biggest rule you need to master? Only charge purchases you can afford to pay off in full each month. That way, you can avoid interest and fees while enjoying perks like cashback or travel rewards.
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3. You're worried about an emergency or unexpected expense
Life is full of surprises, and some of them can be financially challenging. While it's preferable to have an emergency fund set aside, a credit card can serve as a secondary safety net, giving you immediate access to funds if your emergency fund is empty or not enough.
Say your car breaks down and you don’t have $1,000 set aside to pay the repair bill. But you also can’t get to work without a car.
How are you going to get the money? In this case, you could charge the bill to your credit card and pay it off over time. Just be sure to budget accordingly so you can pay it down before interest starts to add up too much.
4. You want to take advantage of introductory offers and rewards
Many credit cards come with introductory offers, such as 0% APR on purchases for a specified period.
Let’s say you have a major expense coming up — like buying a laptop before the school year starts. You could charge that purchase and pay it off interest-free before the introductory period ends, so you can start school on the right foot.
Or, if you have other debts, some credit cards have an introductory offer on balance transfers — typically 0% APR on balance transfers for six months or more.
Another major perk of rewards credit cards is a welcome offer — usually a significant haul of points or cashback once you meet a spending requirement in the first few months.
While it’s never a good idea to inflate your spending just to earn a welcome offer, it's a great perk for spending you were going to do anyway.
READ MORE: How to Maximize Credit Card Rewards
When To Apply for a New Credit Card
Once you have a solid credit history and know how to manage your credit card responsibly, you might consider applying for another credit card. It's important to approach this decision thoughtfully and do it for the right reasons.
Here are three situations in which applying for a new credit card could be a great move.
1. You’re ready to expand your credit profile
Having multiple credit cards can benefit your credit score. Since you’ll have access to more available credit, this will lower your credit utilization ratio, a major factor in your credit score.
You’ll also showcase your ability to manage various credit accounts and maintain a reliable payment history — another win for your credit score.
2. You want to optimize rewards
Different credit cards offer different rewards and benefits. If your lifestyle or spending habits have changed since you got your first credit card, a new card with specialized rewards might be more suitable.
For example, if you love checking out new restaurants, you may want a credit card that earns cashback for dining out. Commuters might look for a card that offers cashback for gas purchases, whereas globetrotters could benefit from travel rewards and perks.
COMPARE: Erika's Favorite Credit Cards
3. You have access to better credit card offers or terms
A limited credit history may have narrowed your options for your first credit card. If you’ve spent the last six months to a year building a good credit history, your improved score opens the door to a whole slew of credit cards.
Cards for a good or excellent credit score often have upgraded rewards and luxury perks, like generous welcome offers or airport lounge access.
A better credit score will likely also get you a lower APR on your new card, which may come in handy if you ever need to carry a balance.
FAQs
What credit score do I need to get a credit card?
It depends. The top rewards cards often require excellent credit, which is typically a score of 740 or above. But there are cards for all levels of credit, including secured cards, which don’t require a credit score at all.
Should I get a credit card as soon as I’m 18?
It’s a good idea to start building credit as soon as possible, as long as you can responsibly handle it. That means paying your balance in full each month and not charging more than 30% of your credit limit each month.
If you aren’t ready, then it’s better to wait. You don’t want to have to clean up poor credit later.
How does a credit card help build credit?
Credit cards report your credit limit, balance, and payment history to the credit bureaus. This information is used to calculate your credit score. If you make on-time payments each month and keep your balance under 30% of your credit limit you should see positive changes to your credit score.
TL;DR: Are You Ready for a Credit Card?
The sooner you can start building a credit history, the better — it affects everything from loan rates to insurance costs. Which is why it's a smart idea to get your first credit card if you're over 18 and are confident you can pay it off in full each month
Once you've proven you can handle one card responsibly, you could add another to optimize rewards for your lifestyle. That could be cashback for dining or travel perks for frequent flying.
Just remember the golden rule: Only charge what you can afford to pay off completely.
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