Don't let fear derail your credit journey.
For many folks, that first credit card is a rite of passage that coincides with becoming a legal adult. And this is certainly a good strategy in many cases -- a long credit history can do wonders for your credit scores later.
Much to my current regret (and the shock of many who know my occupation) I did not do this. It took me another decade past reaching legal age to get my first credit card. A wait that now stymies my quest for a perfect credit score.
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Given how often I extol the virtues of my favorite plastic payment method, why did I wait so long to get my first credit card? More or less the same reasons we avoid many things in life: ignorance and fear.
I had FoCD: Fear of Card Debt
Although it's super easy to find grand success stories from the rewards credit card high-rollers, it's as easy to find horror stories of credit card nightmares. Worse, those nightmare tales often include tens of thousands in credit card debt, tangles with collections agencies, and even bankruptcies.
In my case, I had a credit card horror story in the family. While it thankfully didn't hit the bankruptcy stage, my relative collected a significant amount of debt. As you'd expect, this meant many family gatherings included gossip and "advice" about the dangers of using credit cards.
Of course, I can't lay all the blame for my credit card hesitance at the feet of my irresponsible relative. A good portion of my debt intolerance also came courtesy of the Great Recession of 2008.
Just when I should have been deciding which student credit card was best for buying late night pizzas and beer, the economy was suffering from a systemic debt problem. Since I was already wary of the pitfalls of debt, watching thousands of people break under the weight of their financial problems cemented my decision to stay as far away from credit products as I could.
One thing led to another, and I was well into my 20s before I even thought about my finances beyond rent and bar money -- and nearly 30 before I considered the potential utility of credit.
With age came wisdom (and many rewards)
Once I set out to learn about building up my credit, my mind was blown by how much I didn't know. The idea that responsible credit card use meant not paying a dime in interest fees was a revelation. And the concept of earning credit card rewards was a total deal-changer.
My utter lack of a credit history meant I had to start from scratch when I got on the credit card bandwagon. My research showed that secured credit cards were my best option, so I headed to my bank and signed up.
After about seven months with my secured card, I qualified for my first unsecured rewards credit card. A few months later, I got another. Fast forward five years, and I have a dozen credit cards -- and zero credit card debt.
All's well that ends well
I often regret how long I waited to start building credit. I have a great score now, but my credit history isn't nearly as long as it could be. That means I'm stuck with a credit score that simply won't budge until my accounts age over the next few years. For someone who wants that coveted perfect score, this is a serious bummer.
At the same time, it may have been for the best. I wasn't exactly the picture of responsibility in my early 20s, and because my credit education was mostly nonexistent, chances are good I would have made some serious mistakes. I could very well have ended up in the same situation as my foolhardy family member.
So, what's the moral of this story? For one thing, always educate yourself. If I had researched how credit cards really work, things might have been different. But also remember that it's never too late to start building credit. Every credit journey is unique to the one taking it, so blaze your own trail, no matter where -- or when -- you start.
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FAQs
This means you should take care not to spend more than 30% of your available credit at any given time. For instance, let's say you had a $5,000 monthly credit limit on your credit card. According to the 30% rule, you'd want to be sure you didn't spend more than $1,500 per month, or 30%.
What is a normal credit limit for first card? ›
If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.
How much will my first credit card raise my score? ›
Answer: Opening more credit card accounts won't immediately increase your scores – in fact, they will likely drop a bit. However, after 12+ months of on-time payments, the extra accounts will start to slightly help improve the score.
Is 30 APR bad for a credit card? ›
A 30% APR is reasonable for personal loans only if you have bad credit. It's far from the lowest rate you can get with a higher credit score. Personal loan APRs tend to range from around 4% to 36%. A 30% APR is not good for credit cards.
What is 30% of a $300 credit limit? ›
The rule of thumb for credit cards is to utilize no more than 30% of the limit. 30% of a $300 limit is $90, only use this amount or less if you don't want it to adversely affect your credit score.
How much should I spend if my credit limit is $2000? ›
What is a good credit utilization ratio? The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio below 30%. So, if your only line of credit is a credit card with a $2,000 limit, that would mean keeping your balance below $600.
What is 30% of a $200 credit limit? ›
How much should I spend on a $200 credit limit? The rule of thumb is to keep your credit utilization under 30%. That means if you have a $200 limit, you should aim to keep your total balance below $60.
Why is my first credit card limit so low? ›
A credit card issuer or other lender might assign you a low credit limit based on a number of factors. These could include your income, credit history (or lack thereof) and their internal policies for managing the risk that their customers won't repay what they owe.
What credit score do you start with? ›
Instead of starting from the bottom, you'll actually start with no credit score instead — and that's not as bad as you might think.
Does cancelling a credit card hurt your credit? ›
Closing a credit card could lower your credit score. That's because it could lead to a higher credit utilization ratio, reduce the average age of your accounts and hurt your credit mix. Before closing a credit card, it's wise to consider these factors and the potential impact on your credit score.
Consistently paying off your credit card on time every month is one step toward improving your credit scores. However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.
Should I pay off my credit card in full or leave a small balance? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
What's a good APR for first credit card? ›
A good APR for a first credit card is anything below 20%. Most first-timers have no credit history, so they need to prove themselves as responsible borrowers before getting a really low APR. But there are some exceptions. Student cards also give lower rates, but you have to be a student to get one.
Why is my APR so high with good credit? ›
Key takeaways. Your credit card APR can go up if the prime rate changes, you paid your credit card bill late, your intro APR offer ended or your credit score dropped. If your APR increases, you can work on paying down your balance or transfer your balance to a card with a low or 0 percent intro APR offer.
Is 7% APR good for a credit card? ›
A credit card APR below 10% is definitely good, but you may have to go to a local bank or credit union to find it.
What is 30% of $10,000 credit limit? ›
Most credit experts advise keeping your credit utilization below 30 percent, especially if you want to maintain a good credit score. This means if you have $10,000 in available credit, your outstanding balances should not exceed $3,000.
How much should I spend if my credit limit is $1000? ›
How much should I spend if my credit limit is $1,000? The Consumer Financial Protection Bureau recommends keeping your credit utilization under 30%. If you have a card with a credit limit of $1,000, try to keep your balance below $300.
What is 30% of a 500 credit card limit? ›
You should use less than 30% of a $500 credit card limit each month in order to avoid damage to your credit score. Having a balance of $150 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.
