As with so many things in life, it pays to start early. As in, starting early in adulthood to build up a solid credit history so when it comes time to borrow for big-ticket items such as homes and automobiles, lenders will be more inclined to offer you low-interest rates so you can potentially save thousands over the course of a loan. If you have been in college a few years, or are preparing for graduation and launching a career, making the right money moves now can help you prepare for financial success. PS: Your future self will thank you.

First credit cards

A first credit card is how many people lay the groundwork for their credit history, something that stays with you throughout your life. Look for a card with no annual fee and the lowest interest rate possible. In September 2021, the average annual percentage rate (APR) for student credit cards, according to CreditCards.com, was 16.78%. The temptation to charge up a storm can be strong when that first piece of plastic arrives in the mail. That’s why you shouldn’t buy what you can’t afford to pay off at the end of the billing cycle. To avoid paying interest on what you buy, you must pay off the balance every month so that you won’t have to pay more than what you borrowed.

While the minimum age to open a credit card (as a primary account holder) is 18, those between the ages of 18 and 20 must show proof of employment or other income when applying for credit, to be considered able to repay what they borrow. Some credit card companies will allow for a co-signer, but that has become the exception rather than the rule. If you are 21 or older, you are still required to tell credit card issuers your income as part of the application process.

Do your homework

If you’re in college, look at student credit cards, which you can find with an internet search. Those without a credit history who have graduated and started a job should start receiving snail mail and maybe even emails for unsecured credit cards. If not, check with the credit union or bank where your paycheck is deposited to see what they offer. And before you open account, it’s a good idea to ask the credit union or bank where you plan to place your money for a copy of the fee account schedule – it’s a list of fees – for checking, savings and other accounts. Financial institutions are required by law to provide it and often post the information on their websites. We found one schedule under the heading “checking-pricing-schedules.”

Checking accounts and debit cards

Even before college or trade school, when you have a part-time job in high school, it’s a good idea to open a checking or savings account with a debit card that can be used to withdraw the funds you deposit there. It’s very important to understand that although you can use the debit card for purchases, the bank will likely allow you to withdraw more money than you have and then charge an overdraft fee of $39 (or more) per transaction above what you had in your account. That’s why you should keep track of how much is in the account, so you don’t spend more than you have.

The best of both worlds

While debit cards are a good way to stick to a budget because you can only spend what you have on hand, they won’t help you build a credit history. That’s why it’s wise to have at least one credit card AND a debit card in your wallet. That way, you can live on a budget by using the debit card for everyday purchases and bills and then build your credit by making a few small purchases each month with the credit card then paying the bill on time, without fail, every month.

Contact Lincoln SDA Credit Union if you would like more information on our Credit Card Programs