So you’ve just celebrated your twentieth birthday, recently graduated college and are one of the fortunate ones who’ve found their dream job in this tough job market. Maybe you have a student loan that you’ve diligently worked to pay off and have just leased your first condo. Is it time to apply for a credit card? The benefits could be many – if you’re ready for the responsibility.
Most young adults are ready to kick start their adult lives and many do this by taking a trip. They schedule a Friday off from their jobs and plan to rent a car to drive to the beach. A credit card is always required with car rentals. Naturally, this is one major reason a credit card is a good thing to have. Same thing with hotels – you can’t rent a hotel these days without adding an active credit card to the reservation.
For these purposes, a general purpose credit card serves your purpose. Keep in mind, though, your goal – if you end up charging the room to a card – is to pay it off when you receive the statement. Most financial coaches would tell a young adult that if he can’t pay his statement in full every month, he should put off that long weekend. It’s great advice, but not always well received.
Also, keep in mind that a debit card may not be adequate when reserving hotels, cars or flights.
Many young adults traditionally fall into their parents habits when it comes to their credit habits. Many use the same banks their parents do; they might also use the same credit card companies and dealerships when it comes time to buy a new car.
While that’s a solid way to approach one’s credit, most coaches would encourage young people to do a bit of shopping around. You may find a better deal than what your parents have. We tend to fall into habits when it comes to our buying and saving patterns – same holds true with our financial preferences. Don’t assume the same credit card Mom and Dad have had for twenty years is right for you. It may be a rewards credit card that offers cash back is a better option.
Know What You Have
A credit report that has no history at all isn’t necessarily the good thing many think it is. Because there are no spending and repayment habits memorialized on a credit history, it’s impossible to know if an applicant is going to take his responsibilities seriously. While most creditors will take that leap of faith, there also exists another option. A secured credit card is designed for this very reason.
The Capital One Secured MasterCard is a fine choice and it allows borrowers to get the ball rolling with their credit histories. There are no processing fees or application fees and your payment and spending history is reported each month to the three major credit bureaus. There is a $29 annual fee, but if you’re doing your research, you know that’s certainly reasonable – especially considering some credit card offers have annual fees in the hundreds of dollars each year.
You’ll also face late payment fees and over the limit fees, just like a traditional credit card. Your deposit, which is refundable, can be as high as $3,000 (the minimum is $200). Not only that, but with Capital One’s many online tools, you can really take control of your credit while seeing how your decisions affect your scores.
Plus, if you pay your balance each month, keep your spending under control by not getting too close to your limit, you will find the offers for future credit will be better in terms of the interest rates you’re offered.
A Few Tips
There are a few things to keep in mind as you go about your search. If you carry a balance, you’ll want to shop for a credit card offer that has a low APR. Ideally, you’ll pay that balance every month and it won’t be a concern. Also, too, keep in mind the annual fees. As mentioned, the Capital One secured card offer has a low annual fee – and it’s not the only one. Just keep it in mind as you’re comparing offers.
Also, too, and perhaps most importantly, carefully review the terms and conditions. This is where the “meat and potatoes” of the offer is found. It addresses everything from the grace period to your rights. It also outlines its requirements if there are ever any disputes.
Finally, if you’re feeling overwhelmed or find yourself at a crossroads, unsure of which offer is best, look to someone you trust who’s financially responsible. A bit of guidance is often all that’s needed to help you make a stronger choice that’s sure to affect you for a good part of your life. When it comes to how much money’s going out each month, you owe it to yourself to make the strongest and most informed decision possible.