Navigating Young Adulthood: How to Apply and Use Credit Cards Responsibly

March 9, 2018

 

Becoming an adult is HARD. Whether you're living on your own for the first time, going off to college, job searching, facing relationship struggles, or figuring out who you are and what you want to do with your life, the struggle is real! That's why we want to make it easier for you. We are excited to introduce a new column that's all about navigating young adulthood. Think of this column as the starter pack for entering the scary world of adulthood. 

 

Today we are talking about applying and using credit cards responsibly! 

 

As an 18-year-old, you are at a time in your life where there are many changes and transitions, such as the last bits of the teenage years, the legal right to vote and college. Everything is exciting and exhilarating because you feel the new sense of independence as you begin your journey to young adulthood. With that, there come new responsibilities, including financial management and budgeting.

 

 

I think a common question for students graduating high school and entering college is how to manage finances, including how to apply for your first credit card.

 

I applied for my first official credit card the summer before heading off to college at 18 years old. Credit card companies and banks denied my application because I had no credit history, no regular established income and no individual bank account. In fact, it was not until I turned 20 – just before junior year of college – that I was able to receive my first credit card.

 

Best tactics to prepare you for a credit card

There are several ways to become familiar with the process of credit and automatically boost your chances of receiving your very own credit card as a college student.

 

Store cards: The best way to begin building your credit history is to apply for a store card. Choose any store you frequently shop and sign up for its card. More often than not, store cards will accept those with little to no credit history. I, for instance, signed up for a Kohl’s card. The amount issued on the card will be very low – mine was only $150. But, I was able to understand how spending on credit worked. I was not in debt and paid off my monthly balance on time. After using the card for some time, you can apply for an increase in credit limit, and my Kohl’s card increased to $300 after one year.

 

Parents’ card co-authorization: Another great way is to ask your parents if they can allow you to be a shared user on their bank account. Once your parents add you onto their bank account as a shared user, the bank issues you a debit card with a limit determined by your parents. The card is not so much a credit card, but an ATM and bank card you can use as debit. A bank card will take the money you spend directly out of the available funds, so your parents can monitor exactly how much you spend. Using a debit card under your parents’ bank account will serve as a practical way to begin budgeting finances and managing spending so you do not overuse or overspend credit cards.

 

 

Open your own bank account: I would consider this factor the most important action item to prepare for your own credit card because it acts as the stepping stone to financial independence. Find a bank close to your college or university and open up both a savings and checking account. Stow away at least $25 in both accounts to ensure the bank does not close out your accounts. From experience, I would say banks are much more likely to approve you with a debit and credit card if you have your own account with available funds and continual transactions. In addition, having your own savings means you can begin to save money for future use, and a checking account allows you to write checks. Having your own bank account is also a great way to begin managing your money. Gradually, you will be able to wean yourself off of your parents’ bank cards and use your own.

 

Commit to a job: Whether it is a part-time or full-time job, I advise having some financial transaction regularly adding to your bank account via an income. A steady influx of funds will not only keep your bank account open, but it will also allow credit card companies to see that you have the means to pay off a monthly balance on a card. As a result, you will increase your chances of getting approved for a credit card.

 

Using a credit card without spiraling into debt

Becoming a credit card owner takes a lot of responsibility, for you must learn to manage your finances and balance your budget in a way that is both practical and debt-free. Credit cards are about re-evaluating your spending habits and determining between your wants and needs. As a credit card user, I will say it is rather easy – and quick – to mismanage your shopping habits and pile up debt.

 

One of the best ways to spend without going into debt is to understand your monthly expenses and income. Of course, it is easier to calculate income if you have a regular job or some form of employment. I would develop a spreadsheet of all recurring monthly expenses, like rent and utilities and groceries, and then mark down non-essential expenses, like shopping or spending habits based on wants rather than needs. The spreadsheet should act as a visual representation of how much you spend per month.

 

Now, mark down a monthly income based on weekly or bi-weekly pay, and calculate the total income you receive per month. Then compare income and expenses.

 

If income is greater than expenses, then you will end up with a positive trade-off and have enough money to pay off your monthly credit card bill (and possibly have some funds to transfer to savings). You will always want to aim to be at this point because that means you are spending within your means and what you can afford. Over time, you will benefit.

 

If income is lower than expenses, then you will need to re-evaluate your expenses because you will be at a deficit, spending more than what you earn, which can lead to difficulty paying off monthly credit card bills.

 

While some choose to apply for a credit card early on in their college career, there are plenty who wait until after they have graduated. Either way, be sure you prepare and understand your spending habits and credit cards limits.

 

My name is Sara Kim, a recent graduate of the Roy H. Park School of Communications at Ithaca College. I majored in journalism with a double minor in Health Policy & Management and Asian American Studies. In my free time, I enjoy working out, reading books, watching movies, and cooking. Fun fact: I am a foodie and love to try out new places and recipes. 

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