Building Credit: Your First Credit Card

Updated: Sep 10, 2018

Your First Credit Card | Young Broke Travel

Disclaimer: The following article is opinion, Young Broke Travel is not a financial advisement firm. We always recommend consulting a qualified financial adviser before making any financial decisions.

Credit Cards are an incredibly important tool that can help a young person boost their credit score, which in turn can save you thousands of dollars when you choose to take your first loan, say for a car! Card spending can also yield incredible returns, especially when you take a bit of time every day to optimize your spending. 

Before you we start there are a few ground rules that you need to know-

  1. I am NOT a financial advisor. The following is my informed opinion. If you need help understanding financials, you should consult a professional.

  2. Carrying a balance is NEVER a good idea for young people. It is plain and simple: don’t do it. Do not carry a balance. Paying interest is always going to cost more than the points you earn.

  3. Think before you spend. Points aren't the end all be all. Your bank card might offer 10% cash back at some retailers, so check around. 

  4. Know what a Credit Card Grace Period is!

  5. Start the right way and with the right card. Banks aren't easy to deal with, so know what is and isn't allowed.

  6. Stay away from manufactured spend. This is when you use your credit card to buy cash equivalents like gift card, just to earn points. (Banks don’t like this and can shut you down quickly)

Your first card-

Nobody starts with a good credit score because you have to earn it first. Your Credit Score is what a bank, phone provider, land lord, etc. looks at to determine your "credit worthiness" (a fancy term for "is he/she going to pay us back according to the agreement he/she has made with us"). As you can imagine, this score really can affect you down the road, say when you want to buy a car, plan your wedding, or even get a cell phone! So it is important to start building that score early. Below you will find 3 easy ways to get your score going! I decided to use 2 out of the of 3 and let me tell you, it really paid off.

  1. Authorized user on your parents' card

  2. Take out a SECURED card of your own

  3. Get your parents to cosign a micro loan 

Authorized User on Parents Card:

This method of building credit is by far the easiest for most, because it simply involves having your parents contact their credit card company. Adding an authorized user to a credit card is often free. So as long as they have good spending habits and make all of their payments on time, you are in the clear! Every payment that they make on time will count on your credit history as an on-time payment, but the opposite is also true. If they were to miss a payment, it would count against your score. Therefore it is incredibly important that you only become an authorized user of someone who you trust to keep a low balance and make their payments on time.  

Taking out a Secured Card:

Secured Cards are the best way for a young person to start building credit history on their own. This route puts you in complete control, and so long as you make all of your payments on time and keep a low or no balance you can build an excellent credit score. The primary difference between a credit card and secured card is that you must provide capital (money) to secure the card against default. This basically means that you are paying the bank in advance to have your credit line. If you ever cancel the card, you are generally entitled to that deposit back. A huge plus to this route is that many banks offer an upgrade path to a standard credit card. IMPORTANT TIP: Hold on to your credit cards even if you have moved on to better card. Your credit age is very important to your score, so don’t just open and close cards when you are young.

Parent Co-Signed Micro-Loan:

Another cool way to build that score up is by applying for a micro-loan (normally less than $1000) and adding your name as a co-signer. These loans can be a good way to learn how to pay a small debt back in a manageable amount of time.

Be careful on all of these methods to make every payment, and try your best to pay above the minimum. After completing a loan, you can often even skip the secured card and go straight to started credit cards like the Chase Freedom or American Express Everyday Preferred (using these links to apply is appreciated).

Chase Freedom-

Earn a $150 bonus with Chase Freedom!

American Express-

Earn 20,000 bonus points!

- Matt


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