Sincerely, Starting Out in NYC
Dear Starting Out,
Congratulations on getting your first credit card! A credit card is a great tool to help you build a strong credit score, and with a variety of perks and benefits, it can also help you get cash back on purchases or points to spend on travel. I’ll start with the easiest question to answer here: which card do you choose? As you mentioned, there are tons of options out there, but that doesn’t mean every card is the right one for you. The best card is one that will give you the most amount of benefits that you want. So ask yourself what you like to do, or what you might use your card for. Do you enjoy traveling? Do you frequently fly with one airline? Then maybe a co-branded credit card would be best for you, or one with the ability to transfer points for hotels or plane tickets. Or perhaps you’re a small business owner—you’ll want a card for purchases you make for your business. Or, if you’re like us at The Balance, you’ll want a card that offers good cash back on a wide range of purchases and doesn’t charge a lot of fees or high interest. We have lots of resources to help you decide on the best card for your circumstance and lifestyle. I can understand your nervousness about having a credit card, as many people unfortunately fall into debt or hurt their credit scores. But in order to get over your fear, it might be best to tackle it head on. You mentioned your fear of regretting your decision—if you choose a card that suits all your needs, you’ll probably be less likely to regret it. But maybe you are afraid to get a card because you fear you won’t use it wisely, and will damage your finances. That’s a reasonable fear, but I think if you make a plan on how to use and pay for the card, you might feel more confident. First, remember to pay your card in full each month. Not only is this the easiest way to make sure that you won’t fall into a debt trap, but payment history is the biggest part of your credit score. And don’t forget, if you pay your bill in full, you won’t get charged any interest on your purchases. With the average credit card interest rate jumping from 20.65% in May to 21.06% in June, paying your bill on time and in full each month will save you a lot of money on interest payments. Secondly, make sure to budget each month for spending on fun stuff, your wants, and resist splurges—which often end up on our credit cards. This way, you will have enough money each month to cover your credit card spending when the bill comes. You don’t want to routinely tap into your savings—or not save at all—in order to pay your bill. I think if you do those two things, not only will you strengthen your finances, but you’ll feel more at ease about having a credit card. Good luck! -Kristin If you have questions about money, Kristin is here to help. Submit an anonymous question and she may answer it in a future column. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
