When you’re a young adult trying to navigate a complicated financial world, getting conflicting financial advice is never easy. To make matters worse, there’s an important financial issue that seems to polarize people more than any other: credit cards.
So what should you do if your mom is telling you to get a credit card, but your dad thinks you should wait? Take a look at the information below – the Nerds will help you sort through the details!
Both of your parents have your best interest at heart
First and foremost, it’s important to understand that both of your parents have your best interest at heart. There are valid reasons for suggesting both courses of action when it comes to time to consider getting a credit card.
On the one hand, your mom is probably concerned about you building your credit score. Since good credit is essential to renting an apartment, getting a good rate on an auto loan, and someday qualifying for a mortgage, she has valid reasons for encouraging you to get a credit card. This is because using a credit card responsibly is one of the easiest ways to start creating a good score.
On the other hand, your dad is probably concerned about the potential danger posed by credit cards. Getting into credit card debt is a common phenomenon – as of April 2014, the average household credit card debt in the United States stood at $15,191. This is problematic because interest rates on this type of plastic tend to be in the double digits; plus, carrying a balance can do damage to your credit score. It’s likely that your dad wants to help you avoid the pitfall of debt by recommending against credit altogether.
When it comes to credit, earlier can be better
Objectively speaking, building credit as soon as you can is usually a good idea. We’re not saying your mom is necessarily right, but there is a strong case to be made for getting a credit card as soon as you’re able to qualify.
For one thing, 15% of your credit score is determined by the length of your credit history. If you get a credit card in your late teens or early 20s and use it carefully, you’re helping bolster this portion of your score. Plus, with a demonstrated track record of handling borrowed money responsibly, getting other loans will be easier in the near term. Being able to access credit when you need it will make your financial life easier, and give you more opportunities to boost your score even further.
There are also long-term benefits to getting started with credit as soon as you can. Assuming you follow good credit card habits, you could have an entire decade of conscientious credit use under your belt by the time you’re ready to apply for a mortgage. This will put you in a good position to qualify for the best terms on your first home loan.
How to decide if getting a credit card now is right for you
There are definitely good reasons for getting a credit card as early as you can. But that doesn’t mean that this is the right course of action for every individual. If you’re on the fence about whether or not you’re ready for a credit card, here are a few questions to help make it clearer:
- Am I financially disciplined? Getting a credit card to build good credit only works if you pay your bills on time and in full. If you need to work on your money habits, do so before applying for your first card.
- Do I make enough money? According to the CARD Act of 2009, you’ll need to demonstrate that you have the ability to pay before you’ll be approved for a credit card. If you don’t make a big enough income, a cosigner might be necessary. In the event you can’t find one, holding off on getting a credit card until you have a full-time job may be your best bet.
- Do I understand how credit cards work? It’s easy to make mistakes with your card when you don’t totally understand how it works. Get educated before you submit your application.
The takeaway: There are good reasons to consider getting a credit card as soon as you can, but it’s important to think hard about your own habits and finances before pulling the trigger. And remember, the Nerds are always here to guide you through tough financial decisions – check back often for more helpful tips!
Credit card confusion image via Shutterstock
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