You are here: Home / Credit / Credit Cards Are Not Evil: Don’t Make These Common Credit Card Mistakes
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When most people hear the words ‘credit card’ they cringe. Either they owe their credit card company a balance or they just finished digging themselves out of credit card debt.
Even if they have never used a credit card before, people may still cringe after hearing all the horror stories about their friends sinking into debt with credit cards and tarnishing their credit score. While there are quick credit score repair services to consider, you want to make sure you’re actively monitoring your score and credit card usage. The whole fear about credit cards is only a result of people not really understanding how they work and how to use them.
I’ll admit, I was under the whole don’t-get-a-credit-card spell when I turned 18 so I refused to open an account of any sort and maybe that was a good thing. In 2013, the Market Watch, a Wall Street Journal publication, supported research from a direct study that indicated Congress didn’t believe young people under 21 were capable of being responsible enough to yield a credit card.
The article went on to address “the popular notion during the depths of the recession in 2008 and 2009 that college-aged people were irresponsible spenders lured by free pizzas and T-shirts to take on credit-card debt that would trash their credit history and financial lives.”
Quite frankly I couldn’t agree more. At 18 we are still a little too young to realize the purpose of a credit card and at that age it’s easy to make the mistake of thinking Capital One is just throwing us free money that we won’t have to worry about until much later.
But then I moved out of my mother’s house and I wanted furniture. Can’t finance furniture without credit. In my case I couldn’t even finance a measely couch. In fact, there were a lot of things I couldn’t do without credit and I got tired of it holding me back.
So at 21 I decided to break all the rules my ‘cash only’ friends advised me of and open my first credit card account with First Premier Bank. Let me tell you, First Premier is pretty crappy (in my opinion) and they don’t offer any special awards to card holders like some of the best rewards credit cardsthat are available currently offer. The interest rate is sky high, but opening the account was the best thing I have done to help my credit as a young person. Let me tell you why.
Table of Contents
I committed to the purpose of credit
It’s crucial to understand that credit is not just a pay advance that allows you the opportunity to splurge at the store and make all types of outlandish purchases.
Your credit reflects your proven ability to borrow money and be able to repay it in a timely fashion. Your credit score, demonstrates your trustworthiness to lenders when paying back a loan. Once you realize that and you can commit to the sole purpose of credit and denounce your uncontrollable shopping habits, you’re ready for a card.
Related: I Raised My Credit Score By 150 Points, Here’s How
Be honest, Limit Amount of Accounts
When I opened my account I had to be honest about how much I knew I could handle. Credit bureaus like to see many accounts open. But in my case, I thought it was sufficient enough to just have one at the time.
I could’ve signed up for a few fancy department store cards but that wouldn’t be staying true to my commitment of slowly establishing a great credit score. A Mapping Your Future article confirms that having one card when starting out will help you better manage your spending.
Having several accounts could actually hurt your credit if you can’t keep up with all the payments and they start to accumulate interest. Plus, if you apply for a lot of credit cards and get denied the hard credit inquiries will definitely hurt your score.
Now that I’ve got the hang of this whole credit thing I actually do have a few cards and a diversified range of credit and let me tell you, it all helps.
Related: You Can Now Boost Your Credit Score Without Taking more Credit Card Debts
Carefully Monitor Utilization
Monitoring your credit is crucial if you are trying to build it over time. CreditKarma.com is a free website that allows you to track your spending and monitor your credit and you can login to their system as much as you want. They also pull credit scores from TansUnion and Experian.
Don’t ever make the mistake of maxing your credit card out. For example, if your limit is $1000 a month you shouldn’t be spending $1000 that month or for any month. I always try to only utilize 20% or less of my limit. Credit Karma’s blog states that 30% utilization each month would be the maximum. Anything less than that will help increase your credit score. If you utilize more, your score will drop and you will seem like a liability who is depending heavily on your entire credit limit every month.
Other Common Credit Card Mistakes to Avoid
- Not checking your statement each month to identify any discrepancies early on
- Forgetting to pay you bill each month and not knowing when your billing cycle ends
- Not reading the terms and conditions carefully
- Carrying a balance each month
Stick With It
Credit is not built overnight and it can take years to establish a good score and enjoy the benefits of it (low-interest rates). I’ve made a goal to stick to my monthly payments of paying my entire balance in full so I have a perfect payment history.
Unfortunately, I still plan to keep the First Premier account open because when you close accounts it can hurt your credit score. The never-ending cycle of credit is to always have an open account and to always be paying something, even if it’s only a small payment.
What was your first credit card and did you ever make any of these mistakes? Please share your stories below!
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About Choncé
Chonce is a personal finance blogger and freelance writer who enjoys sharing debt stories (as she and her husband work their way out of $40,000 in debt) along with talking about saving, budgeting, conscious spending and improving your financial house. In her spare time,she enjoys working out, playing sports with her son, cooking, and thrifting.
Reader Interactions
Comments
I totally agree that credit cards are not evil. Right now they are helping my credit score get better and better. Its how you use them is the key. If used properly they can actually be a lifesaver at times. Great post!
Chonce saysExactly! Thanks Petrish!
- Sarah says
Credit cards can be powerful tools if used correctly. Sadly, though, credit gets abused more than it should. I read some article the other day that said (and as with all stats, take with a grain of salt) that 7 out of 10 Americans will put their tax refund towards paying down debt.
- Chonce says
Yeah they definitely can be helpful when you realize how to use them properly. I’m probably one of those Americans, at least this year. I plan to put my entire Federal refund toward my debt, mostly my car note and a little toward my student loans. And if I get anything back from the state I’m going to try to pay my car insurance premium or some other bill. It will definitely help me get ahead but I know I won’t get a refund every year.
- Alexis @Fitnancials says
When I first received my credit card, I really had no idea what I was doing. I got it to obviously build credit, but I wasn’t really sure how to. I also had the feeling of ‘free money’ when I was younger, which I eventually learned my lesson from! Haha.
- Chonce says
Credit cards can really be tricky when you’re first starting out. I couldn’t imagine having a card at 18, because I would’ve probably lost it at the mall. No one sat down and talked to me about what to do with a credit card and how to control my spending. Luckily nowadays there are personal finance blogs for that.
- believeinabudget says
I really wish I knew more about credit cards when I was younger! High schools should be required to teach students these things, ha! I was actually really responsible when I get more 1st credit card. It was for a store at the mall and I still have it all these years later.
- Chonce says
I agree! Schools should really step it up and help teach kids about personal finance.
It was SO long ago, but my first card was Discover, with maybe something like a 500 limit when I was maybe around 20 or 21. And yes I’ve made HUGE mistakes with credit cards…on and off my whole adult life. Luckily it’s been some time since I’ve had cc debt.
- Chonce says
Discover actually doesn’t sound that bad for a first card. I feel like mine was the absolute worst though but no one would approve me at first so I had to take what I could get.
- Barry @ Moneywehave says
Yes you absolutely need to read the terms and conditions. This may sound weird but you want to read the fine print with your credit card benefits. I love getting free travel insurance but I know that VISA offers better travel insurance vs. AMEX, I only found this out after reading the 2 policies in detail.
- Chonce says
That’s a good point. Sometimes it’s tedious and boring to read the terms and conditions in detail but it can really pay off.
- Diane says
Like lots of people, I learned the hard way how to use a credit card, and use it to *my* advantage. Now, I use a credit card for everything. It fits in with my financial plan via a line of credit mortgage and I get great rewards. BUT… it requires a budget and discipline. Always. Plus, I only have ONE CARD and the balance is cleared every month, without fail.
I think it’s a rare 18 -21 year old who can apply that kind of discipline to a credit card. They are handy for emergencies but best handled with caution by the young.
- Chonce says
I feel like people may underestimate how much discipline is needed because the temptation to use your credit card outside of your budget can creep up on you at any time.
Misusing credit cards is much more likely if you are in a tough financial situation. Honestly most college students and 20-somethings fall into this category. If you are trying to get yourself established financially, paying off student loans, etc. it can be very tempting (and easy) to “just charge it” and deal with the balance later. They aren’t inherently bad, but they certainly can be dangerous.
- Chonce says
I’ve been guilty of charging now and dealing with it later plenty of times. Then when I started writing down my monthly budget, I began to realize how much money went toward paying my credit card bills (since I paid them in full each month to avoid interest). That was plenty of motivation for me to stop spending so heavily so I could see more savings each month.
Great point. I honestly have only tracked my spending the past 2 years. Prior to that I would say I did not have a good idea – or handle – on my finances. It’s revealing to see how much money goes towards certain categories of spending.
Thank you so much for writing this! I actually got a credit card when I was 16 and have never (not a single time) paid my credit card late or not paid it in full every single month.
I will attribute that to my parents though and them teaching me the importance of building my credit while also being responsible with my purchases made on a credit card. My Mom always said that if I didn’t have the money currently sitting in my bank account, then it wasn’t wise to charge it to the card either.
I can see how it would be easy to get into credit card debt if your financial situation is rocky, but I don’t think that credit cards should be to blame. It’s all about our perspective on how to use them to our advantage 🙂
- Chonce says
That’s really impressive! I didn’t get my first card until I was 20 and I was still lost, haha. But I think it’s great how your parents explained everything to you and guided you in the right direction. I plan to do the same thing with my son and get him started building his credit as soon as we becomes a young adult. I’m sure he’ll thank me later 🙂
- Jason @ TheButlerJournal.com says
I got my 1st credit card at 21. I’ve had my ups and downs with it. It is currently the lowest it has been in probably 2 or 3 years. Once it’s paid off I’m probably going to cut it up for good.
- Chonce says
I can’t wait to ditch my first credit card as well but unfortunately I’m holding onto it because it’s helping my credit history length
- Prudence Debtfree says
I wouldn’t say that “credit cards are evil”, but I don’t like them at all. I don’t like the fact that “having a good credit score” is so important to so many people. The whole concept trains us to become good debtors. And while many people can use their credit cards very wisely, there are many others who seem to – no, I’ll say actually have an addiction. Telling them to use their credit cards wisely is like telling an alcoholic to have only one drink. And credit card companies profit off of people who max out – and from people who get stuck in the minimum payment cycle. I mean no disrespect, Chonce, and I hope you welcome the occasional disagreement. Not a fan of credit cards or the importance of credit scores.
- Chonce says
I understand what you’re saying completely. It does suck that society almost forces us to use credit cards and build credit in order to buy a house, car, etc. I’m not against desiring to build credit though. I think it’s only right for lenders to use credit scores to have an idea of who would be a reliable and trustworthy person to lend money to. No one should lend money to just anyone so that’s why credit scores and credit history is so valuable. However, I don’t like know credit card companies try to cash in on that and sell consumers a lifestyle that they know they can’t afford, in the hopes of gaining some interest payments from them. I don’t think everyone necessarily has to use credit cards especially if you feel like they do more damage than good for you.
- Prudence Debtfree says
I understand what you mean about the desire to build credit (though I think it’s way better to build savings) and the need for lending institutions to ensure that the people they lend to can pay back. Thanks for responding so thoughtfully : )
- Charissa says
I agree with Prudence that I would rather build savings than a credit score. It all depends on your end goal. I don’t want to be known as a good borrower of debt and so am willing to go about purchasing things in a different way. I am saving money to buy my next car for cash. When we are ready for purchasing a house, I would really like to save cash for the entire amount or if not I will go to a manual underwriter who will look at the whole picture not just my fico score. However, I know the way I am taking requires a lot of patience and saving like crazy.
- Chonce says
That is a lot of saving but I bet you can pull it off because you’re not limiting yourself to being a borrower for the rest of your life. Most people can’t afford to buy everything in cash though but it has a lot to do with someone’s mindset as well. If you give in to lifestyle inflation and don’t live below your means it’s easy to become heavily dependent on credit card and your score. I personally don’t want any revolving debt except a mortgage possibly but it takes a lot of saving and a lot of discipline to accomplish that. The first step is truly believing you can do it.
- Jessica says
I waited a long time to get my first credit card because I didn’t want to go into debt. No joke, I bought a house before I opened a credit card! I finally opened my first card when I was 24 (I think). Since then, I’ve only used cards for rewards and I’ve never carried a balance. A credit card is a great tool if used properly.
- Chonce says
That’s cool how you bought a house before you even got a credit card. How did you build credit without a credit card or did you? Just wondering. My bf didn’t get his first credit card till 24 or 25 so I agree it’s best to wait until you can properly operate a credit card.
- Jessica says
I did have other forms of credit, like a car loan before getting the house. But the biggest factor was relying on my husband’s credit to get the mortgage, so I had a bit of an advantage there. Then the mortgage and the other bills I had in my name helped build my credit.
- Chonce says
Oh ok I see.
