Signing up for a credit card at 19 years old is by far one of the best decisions I have made. It’s taught me financial responsibility, the importance of building up my credit score (more on what that is as you read). As well as, earning myself some extra spending money. Yes, you heard that right, credit card providers will literally give you money. What’s great is you can easily do the same thing with almost no effort.
What is credit & what are credit cards?
Credit is simply money that you have borrowed. You see, when you purchase products on a credit card. The money for those products is actually covered and paid by your credit provider, until you pay back the provider.
For example, if I buy a sandwich for $7 with my Discover credit card on April 1st. Discover will instantly pay the Deli the $7. I have until May 1st, exactly 1 month to pay back my credit provider, Discover.
Essentially, when you buy things on credit, you do not spend your own money at the moment of purchase. You pay back your credit provider over time. For credit cards, it’s every month.
Stop using your debit card so much!
Making purchases on a credit card increases your credit score.
Credit score: An analysis of how good you are at paying back credit. Tells whether or not you are trustworthy when it comes to paying back borrowed money. Your score is a number from 300-850. 850 means you are as trustworthy as it gets. 300 however… not so much.
When you buy things on a debit card it is the same as buying something with cash, except with a plastic card. You are not improving your credit score.
Why you need good credit.
Having a high credit score leads to AMAZING benefits down the line in life.
- Taking out a new car loan in the future, your interest rate will be lower. A score of 750 pays an average 5% interest, while a score of 550 pays 11%. Both on 5 year loans.
- When you buy a house in the future, your mortgage rate will be lower.
– Note. Buying a several hundred thousand dollar mortgage with bad credit, will lead you to pay tens of thousands of dollars extra in interest….
- Loans for fun purchases like jetskis, boats, big home renovations will have a lower rate.
**It’s not a matter of “if” you take out loans in the future its a matter of “when you do.” You want interest rates to be as low as possible. High interest rates means you are paying 1,000s of extra dollars, when you don’t have to!! Why choose to pay more?
Start building your credit score right now
- Apply for a credit card.
-I recommend Discovers Student Card if you’re just getting started. It has no annual fee, meaning you do not have to pay an upfront or ongoing fee to keep the card. I have this card and still use it to this day. Use my link and we both get a free $50 to spend. (This is what I meant by free money). https://refer.discover.com/s/tbrescia238
- Start making your everyday purchases with this card.
-Going out money
- Set up the recurring payment once you get accepted, so you have a set day of each month where your bill gets paid. Mine is the 10th of every single month for reference.
Things to avoid with a credit card
- NEVER make a late payment!!
-This is the worst thing you can do with a credit card. It lowers your score drastically, and you have to pay interest on the money you owe. Good thing this is easily avoidable when you set up a recurring payment like I mentioned.
- Don’t spend over 30% of your total credit line.
– Once you’re accepted to any card, they provide you with a limit of how much you can spend each month. The student card is lower than most, when I first got accepted my limit was $1,000.
– Obviously I don’t spend $1,000 a month. But if I inch toward that line, credit providers get worried. So I can spend at most $300 on the card per month in this case.
- NEVER make a late payment. (I will keep saying this until the end of time)
More free money!!
Almost all credit cards offer cash back on certain purchases. Things like gas, groceries, Amazon purchases, Restaurants, etc. Usually from 1-6% cash back on purchases.
Cash Back: Credit providers give you a percentage on certain things you buy. Ex. Say your card gives a 2% cash back at gas stations. It costs $40 to fill your tank, the credit provider gives you a free 80 cents. It’s not much but its free money on purchases you regularly make.
Travel Rewards. Some cards offer points you can use to pay for airlines, hotels, etc. The more you use the card the more points you recieve. These points add up overtime. Maybe they can pay for next years spring break trip to Cabo…
It is time to enter the world of credit. It’s not nearly as scary as it sounds I promise. If you pay your bill every single month, you will see all the benefits credit cards offer. I ask that you please share this post with a friend, I know it will help them out a ton. If you have any questions DM me on Instagram @tj.brescia, I’ll be more than happy to help!!
-Get a free $50 when signing up for a Discover Student Credit Card https://refer.discover.com/s/tbrescia238