How I got started with credit cards

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Building good credit is one of the best things you can do for your financial future—but many young people are nervous about getting a starter credit card. Perhaps you don’t know if you’re ready for credit, or if you are, how to choose your first credit card or build a good credit score. And then what happens if you miss a payment?

Dhahran Velasquez-Channer is one of many young people working to build their credit as quickly as possible—and so far, he’s made all of the right financial choices along the way. Here’s his story, along with some expert advice from Experian, to help you understand how to get started with credit cards and how you can use credit to build a solid financial foundation.

Getting a first credit card

“In high school, my father set up joint checking and savings accounts for the two of us to use,” Velasquez-Channer said. “When I went to college, I decided it was time for a bank account of my own.” Velasquez-Channer opened his new checking account through Bank of America—and because he was able to deposit more than $2,000 in his new account, he didn’t have to pay any checking account fees.

After Velasquez-Channer was able to demonstrate that he could manage his new checking account responsibly, Bank of America offered him a starter credit card. Velasquez-Channer understood that building credit during his college years was an important financial opportunity—so when Bank of America told him that he had qualified for the Bank of America® Customized Cash Rewards credit card, he was more than prepared for the challenge.

“I had already taken some financial coaching sessions, so I had an understanding of many things that other people don’t think about until much later on, like the importance of opening a 401(k) or investing in the stock market,” Velasquez-Channer explained. “I was excited to start exploring credit and building my credit score.”

What you should know before opening your first credit card

Before applying for your first credit card, it’s a good idea to do what Velasquez-Channer did and get some basic financial education. Velasquez-Channer pursued financial coaching sessions through a local nonprofit organization, Human Resources Agency of New Britain. You can look for similar nonprofits in your area if you want the experience of working personally with a trained financial counselor. There are also many free finance courses available online through universities and education platforms such as Khan Academy, or you can search online learning platforms like Coursera or Udemy for a mix of free and paid options. You can also check out personal finance podcasts to learn on the go.

“There are many instances in life where it’s OK to learn by making mistakes, but credit is not a time you want to do that if you can avoid it,” said Rod Griffin, senior director of consumer education and awareness at Experian. “Even small mistakes, like a single missed payment, can have a negative impact on your overall credit history and credit scores for a long time.”

Building credit as soon as possible

Velasquez-Channer knew that building credit now could open up a lot of money-saving opportunities later—and he had a plan to help him establish good credit quickly. “I kept using my card, budgeting, not overspending, making every payment on time,” Velsaquez-Channer told us.

By the time Velasquez-Channer graduated college in 2019, his credit score was 760. He’d not only built good credit, but also earned a “Very Good” credit score under the popular FICO scoring model.

“Now I want to get my credit score up to 800,” he explained—and yes, he has a plan to help him get there too.

The benefits of building credit early

Since your credit history can affect everything from future interest rates to your ability to rent an apartment—or, in some cases, get a job—we recommend building a positive credit history as quickly as possible. “Building credit takes time,” Griffin said. “The earlier you get started building a credit history, the likelier it will be there to work for you when you need it.”

“Even if you don’t plan to rely on credit,” Griffin explained, “it’s a good idea to establish a credit history so it’s there to work for you in an emergency or at other times throughout your life.”

Griffin recommends Experian Boost for people at the start of their credit journey as it incorporates bills you may already be paying with debit, like your cellphone, utilities or streaming services. According to Griffin, “Credit scores improve for nearly 70 percent of people who use Experian Boost and it’s especially useful for people who have limited experience with credit.”

Staying mindful of credit card debt

If you’re avoiding your first credit card because you’re worried about credit card debt, a few good habits can keep you in the black while giving you access to all the perks of credit cards.

You can use credit cards without going into debt, as long as you’re careful about what you purchase and make sure that any charges you put on your credit card fall within your budget. Then, all you have to do is pay off your balance on time every month.

“I haven’t missed any payments,” Velasquez-Channer said. “At first I paid off everything I spent immediately. Now I wait until I get my statement balance and pay it off in full.” If you’re worried that you might have trouble remembering to make your credit card payments, you can always set up credit card autopay.

When you pay off your statement balance in full, every month, you can save money by taking advantage of your credit card grace period. This helps you avoid interest not only on the balance you’re paying off, but also on any charges you make on your card before your next statement closes.

Do you have to carry a balance to build your credit?

“It’s a common misconception that you need to carry a balance from month to month to build credit,” Griffin explained. “This is not true. In fact, it’s best to regularly use your credit card for a small purchase that you can pay back in full each month.” Then, simply pay off your purchases in full before the due date.

Deciding on credit vs. debit

Debit cards are convenient, easy and accepted nearly everywhere, but credit cards have some unique perks to consider. If you’re trying to decide between sticking to debit or applying for credit, here’s Velasquez-Channer’s advice: “I tell people who are only using debit cards that they have to take all of the risks into account. If your credit card gets stolen, it’s not your money that’s being lost. It’s the bank’s money.”

This is why using credit is generally safer than using debit. If your debit card is compromised, you could end up being liable for a portion of the fraudulent charges. Most credit cards, on the other hand, offer zero fraud liability—which means that if you didn’t authorize the charge, you aren’t liable for paying it off.

Credit cards also offer a few other benefits that you can’t get when you use debit, including the ability to earn rewards on every purchase. “I use my cards in rotation to take advantage of the benefits,” Velasquez-Channer explained. When he buys gas, for example, he uses the card he has with the best rewards on gas purchases. That way, he always earns the maximum cash back or points available to him.

One more reason to choose credit over debit

Want another reason to consider a credit card? Credit gives you the potential to cover a big expense that you might not be able to afford on debit. “Most of us can’t pay cash for all things,” Griffin said. “Credit can be a financial tool to help pay for items over time instead of in one lump sum.”

If you’re thinking about using a credit card to finance a big purchase—whether it’s an emergency car repair or a much-needed vacation—consider applying for a 0 percent intro APR credit card that will give you the opportunity to pay off your purchase before it starts to accrue interest.

Using credit for the future

Remember how we told you that Velasquez-Channer had a plan for building an 800 credit score? He’s well on his way and expanding his credit card collection.

When looking for a new card, Velasquez-Channer discovered that many of today’s best credit cards require a minimum income level that he couldn’t meet. COVID-19 made getting a post-college job difficult for many new graduates, although Velasquez-Channer is about to start a new job very soon.

So Velasquez-Channer decided to build his credit score by applying for retail credit cards. Retail cards often have more lenient eligibility requirements, but they tend to come with higher APRs than bank-issued cards. If you’re thinking about using a similar strategy to build credit, make sure you follow Velasquez-Channer’s advice and avoid charging more than you can afford—otherwise, you could get stuck paying higher-than-average interest rates on your purchases.

Velasquez-Channer was confident in his retail card strategy and went all-in with applications. “In addition to my Bank of America credit card, I just opened four new credit cards,” he explained.

We generally recommend spacing out credit card applications, as applying for multiple new credit cards at once can temporarily lower your credit score. Indeed, Velasquez-Channer’s score dropped to 733 after his new credit applications. However, he’s hoping that adding more available credit to his portfolio will give him the opportunity to get his score closer to that coveted 800 to 850 range.

Once Velasquez-Channer boosts his credit score from good to excellent and establishes a consistent monthly income, he’s going to start applying for some of the best rewards cards on the market. “There are a lot of good starter credit cards but you should always evolve into something better. I want the American Express® Gold Card and the Platinum Card® from American Express,” he said. “These cards have high annual fees, but they come with a lot of bonuses that you can take advantage of. I’m already dreaming of my first free flight!”

We’re rooting for you—and for anyone else who’s ready to use credit to achieve their financial dreams.