Opening Your First Credit Card

Credit cards are a critical aspect of financial wellness. With a credit card, you can build credit, earn rewards, get robust fraud protection and simplify how you budget or track expenses. At the same time, credit cards can lead to significant debt if used in the wrong way. Here’s what you need to know about opening your first credit card. 

Using a Credit Card: The Basics 

When you make a purchase with a credit card, no money leaves your bank account. Instead, you’ll receive your tab at the end of the monthly billing period. At that point, you’ll pay back the credit card company for any money spent. Spending with a credit card allows a consumer to make a $250 purchase today, then pay it back over time—even if the money isn’t currently in their account.  

It’s always advisable to pay your total full statement balance every month. If you can’t pay the full balance, you start to accrue interest—and the more money you fail to pay off, the more money you will owe. Credit card interest rates typically hover around 20-30%, depending on your credit score, so unpaid bills add up fast. If you don’t trust yourself to manage credit card payments, or you’re worried about spending more than you can afford, speak with a financial counselor before getting a credit card.  

What If I Don’t Have Credit? 

If you’re new to the world of credit, or have a low credit score, it may be difficult to get approved for a credit card. Still, you do have options. Consider becoming an authorized user with a friend or family member, before applying for a card of your own. As an authorized user, you’ll still get a card which is linked to the original cardholder’s account. Most importantly, you’ll be able to build credit and therefore apply for a better card in your own name when the time comes.  

On the other hand, if you’re new to the world of credit and don’t qualify for any cards or have an authorized user to seek help from, you can instead apply for a secured credit card. A secured card requires an upfront deposit and is specifically designed for people looking to build their credit. 

How to Choose a Card  

Look for a credit card that offers great rates and simple terms—with no gimmicks and no hidden fees. Be especially wary of cards designed for people with low or no credit, or cards that seem too good to be true. Predatory credit products encourage users to spend big, but often come with high interest or unexpected fees later on. 

The right credit card should be clear about its APR rates, so you know how much interest will be owed on unpaid statement balances. Also look for a card with rewards. Some cards, including credit card options from Harvard FCU, offer cashback rewards plus bonus points on initial spending. The ability to earn cashback rewards on gas, groceries and more is one major benefit of having a credit card. 

Using Credit Responsibly  

As a first-time credit card user, it’s tempting to spend above your means. Don’t do it! Wherever possible, aim to only spend money you already have. By treating your credit card like a debit card, you can avoid any interest, earn the best rewards, qualify for better financial products later on, and have the best chance of staying out of debt. Tracking your spending and setting up an automatic monthly payment can help to ensure you’re spending smartly and avoiding debt.