BMI Federal Credit Union
Responsible Credit Card Use
Getting Your First Credit Card
Getting your first credit card is a milestone in many young peoples’ lives. But with this new milestone, comes new responsibility. If you think your teen or college student is ready for their first credit card, you want to make sure they know how to use it and how to use it responsibly. Sit down and share this list with your teen or college student, so they know how to spend responsibly and ensure the security of their financial future.
- Build good credit. Credit cards – when used responsibly – can help you establish good credit history - remember that it takes credit to get credit. While you may not need a loan or other credit at this time, odds are you will when it’s time to pay for college, buy a car or purchase your first home. Showing lenders you can responsibly use a credit card helps them feel more confident that you will pay back their loan as well.
- Look into rewards. Some cards come with extra perks, such as a cash back bonus (which can be applied to your statement, received in the form of a check, or used for gift cards or merchandise). Combined with the importance of establishing credit, rewards such as these are a nice bonus. Just make sure you aren’t getting charged an annual fee from the company to get them.
- Use credit responsibly. The biggest rule when it comes to responsible credit is do not borrow more than you can pay off each month. For example, if you use a credit card to purchase gas for your car – let’s say two fill-ups of $40 – you need to set aside $80 to pay off the bill at the end of the month. Why? Two words: interest charges. Each month you don’t pay your account balance in full, the credit card company will charge you extra money in the form of a percentage of your balance.
- Study the terms. Take the initiative to understand the terms that go along with your credit card and read the fine print. Some cards offer an extremely low introductory interest rate which will increase after six months. You don’t want to make bad habits that could potentially ruin your credit in the long run.
- Pick a card that’s right for you. There are many types of credit cards out there, take the time to look around and select one that’s going to fit with your current needs. But, as stated earlier, make sure you’ve read and understand the terms and conditions so that you’re not caught off guard by fees and rising interest rates.
These are some of our top tips for helping your teen or college student find their first credit card. As with anything else, take the time to talk with your child – their finances will follow them for the rest of their lives, and you want to make sure you’re helping them make as informed a decision as possible.