Decided to apply for your 1st credit card? This can be a scary application since we constantly hear of people buried in credit card debt with high interest rates and minimum monthly payments that are impossible to pay off. However, it doesn't have to be scary and in fact, we can use credit cards to help keep more money in our pocket!
First off, the Golden Rule: Use a credit card like it's a debit card.
What does that mean? Simple, only spend what you have! Do not, and I cannot emphasize this enough, do NOT pay for anything with your credit card if you don't have the money to pay it off immediately.
Why not just use a debit card then? Credit cards provide a way to receive cash back and to build good credit, which will help you in the future when applying for a mortgage or other potential loans. Credit agencies require people to get in "debt" so they have a credit history that shows if they are reliable in managing debt. Oddly enough, staying safe (and smart) by just using a debit card will actually drastically hurt your odds at obtaining a mortgage/loan since the companies have no credit history. Seems backwards, doesn't it?
So how do I know which credit card to choose from? Look for the credit card that has a large enough credit line for your monthly spending, while evaluating their initial rewards, cash back, and annual fee.
If you are still a student, I highly recommend Discover's Student Cash Back credit card. There is no annual fee, great cash back rewards, and is a great way to start building your credit while still in school. This card gives 5% cashback on certain categories that change every quarter (and 1% cashback on all other purchases), and they will DOUBLE all the cash back you accumulated through your first year of having the credit card. Essentially, for the 1st year, you are receiving 10% cashback on quarterly categories and 2% cashback on all other purchases! Incredible for your 1st credit card!!
If you are out of school, look for credit cards with NO annual fee, an intro offer, and nice cashback rates. First, click this link to view Nerd Wallet's top monthly credit card deals and find their top picks for cash back. Avoid any credit cards with annual fees! When you find a credit card, review their intro offer (most will provide a cash bonus after spending a certain amount in the first 3-6 months) and review the cash back they provide. Beware, DO NOT spend money just to achieve the intro offer. The intro offer is an extra potential bonus that you may achieve through your normal spending. Evaluate your monthly spending and choose an intro offer that you have a high chance of reaching.
Bottom line: Credit cards should ONLY be used as a way to earn cash back and build your credit for the future. Credit cards should NOT be used to spend money you don't have!! Remember the Golden Rule, that a credit card should be used in the same way as a debit card so we can take full advantage of its benefits.
Found a credit card but not sure if it fits the criteria for a good credit card? Send us the link and we will provide our opinion!!