First time credit card owners will definitely have no shortage of credit card companies throwing “amazing” offers at them.
I have nothing against responsible credit card use. The fact of the matter is that you need to build a decent credit rating if you ever want to get a loan (business, mortgage, car, etc.). If you know what you are doing and simply want a credit card to build your credit then that’s awesome!
Unfortunately, most twenty somethings don’t know what they’re doing when it comes to credit cards (or proper behavior when drinking alcohol, or maybe that’s just me). This is why credit card companies (and bartenders) take advantage of us.
The other day at the subway station and downtown I noticed that, credit cards are using marketing to prey on our emotions. Obviously I knew this a long time ago but the marketing was just blatantly placed right infront of this 20 something personal finance blogger. It’s like they were asking me to write a blog post about it.
American Express posters were literally all over the place. Two classic pieces of marketing from this credit card company were:
“Impossible is two letters too long.”
“We see you us as a person, not a number.”
Okay wtf does any of this have to do with a credit card?
Are you trying to make me feel good by knowing that you are willing to lend me money at an 18% APR?
Why would there be an inspirational quote in a credit card ad?
All great questions without great answers.
I just want to say that as a first time credit card user, you need the right credit card. I’m not going to sit here behind a computer screen and tell you what credit card is perfect for you. That is just plain stupid when I see a blogger do that. We all have different needs and more importantly- different lives. It’s like when someone tells you what to drink. Not all of us like to drink wine. Just like how not all of us will use the same credit card.
What is ideal for a first time credit card user?
No annual fee. What if the credit card company tells you they can’t waive your annual fee? Then go somewhere else. Yes it really is that easy. Unless you have made some horrible decisions in the past and nobody is willing to loan you a penny, it’s a buyers market. First time credit card purchasers need to understand that there are so many credit card companies out their vying for your business.
Once you waive your annual fee you need to be aware of the many other credit card fees that could bite you in the butt today or down the road.
Decent APR. I’m not going to suggest that you chase rates or try to find the lowest possible credit card rate. Why? Because those are usually temporary. The unfortunate part is that the credit card company is not quick to alert you that the temporary rate is going away. You also don’t want to get into the habit of switching credit card providers due to small changes here and there.
Cash back rewards credit cards can be great. This is what I use. I have read about the pros and cons of a cash back rewards credit card and I have opted to stick with it. No I do not spend more money for the potential of receiving more “cash back” at the end of the year. I just use it for major purchases (vacations, getting my girlfriend a gift- which can be very major) and for repetitive purchases (monthly subscriptions).
Points are amazing as well. If you fly a lot or plan on working in a job that requires you to fly a lot then I would recommended this option for a time credit card user. You will usually have to bite the bullet here and pay the annual fee but it will be worth it in the long run.
I know that Citibank offers you one point for every one dollar that you spend on your credit card. Not sure what everyone else out there is offering because I live in an igloo in Canada and more importantly because I’m happy with my current credit card.
(Side note: Yes it’s a psychological problem that happens to many 20 somethings. If you have a credit card with casback rewards or points, watch out so that you don’t spend more money on shit you don’t need in hope of earning more points.)
Where can I find the ideal credit card?
Your local bank. Honestly if you know the manager of your local bank by first name and drunk dial them on the weekends, then this is an amazing place to start. My local branch of my bank gave me my first credit card without any paper work. How come? Hopefully not because they thought I was an idiot that would be a cash cow. I would like to think it’s because I know my bank rep. fairly well and he was willing to take care of the paper work himself.
Online banks. A click-and-mortar bank saves money from less marketing, less employees, and the obvious- no branches or locations. As a result, online banks are usually able to offer you better (higher) rates on your savings accounts and better credit card deals.
I don’t want to give a cop out answer so I will tell you that I have an online ING banking account and a cashback rewards credit card from a chain of a popular bank that happens to be a 5 minute walk from my house.
What credit card tips would you share with first time credit card owners?
(P.S. Yes I used the picture because the lady was pretty cute.)