How To Get Your First Credit Card

I got my first credit card from one of those guys on campus with a folding table and free tshirts. Back then, they gave give credit to anyone who could fog a mirror. No income? No assets? No clue? No problem! The tshirt wasn’t even cool, it was for AT&T, and I got it as easily as my first beer. Nowadays, what the meltdown of our financial system and all, they actually have some requirements to pass before giving you a credit card. Crazy. So what’s a young consumer looking for fresh plastic to do?

Note: Neither juggling axes or credit card debt is particularly advisable for the novice. Credit cards are tools for managing your cash flow and should be used wisely, and treated with caution. Only use a credit card if you can pay it off in full every month, otherwise you’re practically paying someone else for your own money. That said…

If you are a student, the easiest way is to apply for a student credit card. There are several student-targeted credit cards available, such as the Citi mtvU credit card, that are familiar with the risks associated with extending credit to low-income students. Credit limits are often low, terms are typically average, and you’re much more likely to get accepted.

If you have a steady job and decent credit, just try applying for a credit card that best fits your spending habits. Sites like Bankrate or Billshrink can help you choose.

For a long time, having a steady job and decent credit seemed to be the only requirements for getting a card. Or even just one of them. Now, with credit cards companies getting choosier and choosier, you will likely need both to get your pick of the bunch.

If you don’t have much history, and have been rejected because of it, try a store credit card. Many department and mall stores offer credit cards. They often have very low limits, correspondingly low credit requirements (like $250 – $500), and offer an easy way for you to build up a history of being responsible with unsecured credit. After a year or so of using that card, you might become eligible for a much larger, more rewarding, unsecured card.

Piggyback To help build up your credit history and get better cards and terms, ask you parents if they will add you as an “authorized user” on one of their credit card accounts. Now you benefit by looking like you have a longer and, assuming your parents aren’t deadbeats, more positive credit history. You don’t actually get their credit card or access to their account, it just buffs up your credit score.

A secured card is your last resort. Secured cards require you to put down a cash collateral that then becomes your credit limit. Secured cards aren’t ideal but you will likely never be denied a secured credit card because it’s backed with your own money. Why would you get this over a debit card? Secured credit cards are reported to credit bureaus and can help improve your score, thus opening the door to unsecured credit cards (sometimes the issuer will be willing to convert the card for you). The best place to ask for a secured card is from a bank or credit union you already work with, you will likely be charged fees if you go with independent issuers. One gotcha to look out for, make sure the issuer of the secured credit card reports your usage to the bureaus (if they don’t… well that defeats the purpose).

Hey wait, aren’t credit cards evil? Why yes, they are. But a necessary one. If you ever hope to buy your own place or get a car loan, you need to start building a credit history. Getting a credit card is the best way to do that. Getting a credit card is also a great way to get in a cubic ton of debt and spend the rest of your life working it off like a drone. So play smart and don’t charge any more on it than you can pay off in a month. Going cash/debit only for most transactions, and only using credit cards when you want chargeback protection or have a temporary cashflow issue is a good way to go. Remember kids, debt is slavery!

Jim writes the blog Blueprint for Financial Prosperity.

Comments

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  1. ArcanaJ says:

    Wait, we’re telling college students how to GET credit cards, rather than to avoid them?

    Oh, Consumerist! how you confuse me.

    • Darkest Daze says:

      @ArcanaJ: If used responsibly, they’re an easy way to build credit, which you’ll need for any kind of large purchase like a car or house.

      • ArcanaJ says:

        @Darkest Daze: See, I disagree here. If (the hypothetical) you can afford a thing, buy it with cash. If you can’t afford a thing, how can you possibly afford a credit card payment?

        I speak from stupidly painful experience.

        I also don’t think that credit is necessary. Had that money gone into savings, all those years of high interest rates, finance charges and debt payments would have bought my house and several cars. And no matter what’s for sale, nobody turns down cash.

        • AliyaBabasaur says:

          @ArcanaJ: Your totally wrong here about buying a house. How long would the average person have to work to save up $150,000? and why would it make financial sense to do that instead of responsibly building credit, using your good credit to acquire a low-interest mortgage. Why would you pay rent for all of those years (money you give up and never get back) when you could have been making low-interest mortgage payments and building equity?! There is NOTHING wrong with building good credit. Especially if you can do it while never paying interest.

          • KyleOrton says:

            @AliyaBabasaur: I knew your comment wasn’t worthwhile when you paraphrased “throwing away money on rent” and used the term “building equity.”

            If someone chose to rent in many areas and saved all of the money they would spend on property taxes, interest charges, and maintenance costs they’d have a whoooole lot of cash. Add to that the closing costs they didn’t pay, the down payment they didn’t put into their house and the interest payments from all of that sweet, sweet cash and I think they could buy the house in 7-8 years.

            If they’re really motivated, they can spend the free time not spent fixing their house on a part-time job.

            Also, after they pay cash for that house they don’t have to pay any interest again and put money in pocket every month the next 22 years that someone else is paying their mortgage.

            • ArcanaJ says:

              @KyleOrton: See, this is what I’m talking about.

              Even paying rent, with no credit card payments and no car payment, a two-income couple can reasonably put away as much as $1000 per month. That would give them the funds to buy a house in many parts of the country in 10-15 years.

              Or, allowing for those with less patience, the same savings in half that time would make for a whopper of a down payment. A down payment large enough to outweigh the lack of the “almighty” credit score.

              • Anonymous says:

                @ArcanaJ: I have the cash sitting in my bank account, so I can afford to buy it (say a book) outright, but I don’t want to have to run to the bank and carry large amounts of cash every time I want to buy something or somethings.

                There are also some things that are not practical to buy with cash, such as airplane tickets (I would have to run to the airport to buy the ticket, I suppose) and hotels (I do not want to carry large amounts of cash with me, and sometimes traveller’s cheques are awkward to use).

                • ArcanaJ says:

                  @ThomasinaAndreus: But isn’t this then a case were a debit card would just as easily do the job of a credit card?

                  • Anonymous says:

                    @ArcanaJ: Why would I want to carry around something so dangerous as a debit card? It has all the disadvantages of cash (easily stolen or lost) without any of the advantages (universally accepted).

                    If I lose (or have stolen) a credit card, I am only liable for a small amount ($50). If I lose a debit card, whoosh! someone can siphon everything out of that bank account. At least with cash, the only money I lose is that which I had physically on me. I would rather keep to a bare minimum the number of people and agencies that have the right to withdraw money from my bank account, thank you very much. I don’t want to add strange merchants too. Who knows what fraud they might do?

                    What if I want to return something I bought? If I have a credit card, since I am not obligated to pay at that instant, but have promised to pay at the end of the month, the transaction can be cancelled, and so I am no worse off than before: I am obligated to pay $0 now. I can just imagine how awkward it would be to get the transaction reversed if I had used a debit card.

                    With a credit card, I will only owe the amount paid for. I am not so foolish as to use the credit card as some sort of ATM at a store, because I’m not excited about paying a fee or interest for such a thing. I see people casually using debit cards like that all the time and it makes me shudder. How easy is it for them to lose track of what they have?

                    If I have to have cash, I will go to one of my bank’s ATMs (or the bank itself) and withdraw the money directly from my bank account. And I will get told how much money I have left in my account so I will know to slow down my spending. I can’t see a debit card telling me that.

                    In short, you can lose track of your spending far more easily with a debit card than with a credit card. And oh, yes, what if there is an emergency that I have to pay an unusual amount for something? With a credit card, at least I don’t have to pay the whole thing all at once, unpleasant as it is to have to pay interest. With a debit card, once my balance is 0, I have no more money until my next paycheque. [from ThomasinaAndreus]

            • AliyaBabasaur says:

              @KyleOrton: That’s why you make informed decisions about when, where and from whom you buy. Besides, making low-interest mortgage payments can be a good even if you DO have enough cash to pay for a house. Unitl recently, all of my investments were pulling in a rough average of 9% APY. WHY would I pay for a house in cash, a house that may not appreciate very much, when I could pay 5% interest on a mortgage and invest the money I would have spent on a house which would, at this point have been a VERY POOR INVESTMENT, given the current housing situation.

        • supercereal says:

          @ArcanaJ: I’d like to meet the person who can afford to buy a car, house, and college education up front without credit. I have all of them, and can somehow afford a monthly payment… In these cases, credit was used as an investment tool that now yield higher returns.

          Used responsibly, credit cards give consumer protection, traceability, and simplicity. If you use them responsibly, I don’t see a single negative thing about them. In fact, you’re safer using them then using cash/a debit card in many cases…

    • azntg says:

      @ArcanaJ: Wait, we’re assuming that credit cards are always evil no matter what?

      Dang. This is confusing!

      • ArcanaJ says:

        @azntg: In this economic climate, in this society of bigger, badder, shinier, more, credit cards ARE always evil.

        It’s easy (and not unjustified) to blame credit card users for their a lack of fiscal responsibility. However, credit card companies spend millions annually looking for new ways to bait that treacherous hook. They are not blameless in their rapacious and relentless pursuit of profit at our expense.

        • azntg says:

          @Dan W: Personally, I’m glad that the industry is starting to tighten as well.

          For far too long, some of the financial institutions have let too many people way go over their heads. Not to mention that the financial institutions have become excessively greedy as well.

          However, I still believe that they should tighten in such a way as to not to choke everybody off at the same time. The way they’re doing things is the fast track for yet another kind of disaster.

          To make a drug analogy, it’s like cutting off an addictive drug supply completely and without any notice when more than half the population is still addicted and still desperate for more. I don’t even want to know what the withdrawl symptoms are… they don’t look too pretty for me.

    • XianZhuXuande says:

      @ArcanaJ: Credit cards are great tools in the hands of a responsible user. The article explains the dangers of credit cards quite clearly, while at the same time trying to educate. I think this was a pretty good article, actually.

      Now, most people won’t follow the important ‘pay in full’ advice, but they’ve only themselves to blame for the consequences.

      • ArcanaJ says:

        @XianZhuXuande: I disagree about credit cards being even a useful tool, let alone a great one. But then, I’m a big ol’ Dave Ramsey fan, so I doubt we’re going to see eye to eye on this one.

        • Parting says:

          @ArcanaJ: For me, it’s a tool. I get 1% cash rebates, a possibility of a chargeback and extended warranty on my electronics – for free.

          The trick, is to pay in full every month.

        • XianZhuXuande says:

          @ArcanaJ: Dave Ramsey? Haha… yeah, we won’t be seeing eye to eye then. Life is sometimes easier when you hide your head under a rock to avoid responsibility and opportunity–at least until you need to qualify for a car loan or a mortgage.

          • ArcanaJ says:

            @XianZhuXuande: We have a mortgage, upon which we have already paid a substantial amount, and we paid cash for our last car.

            How is that “hiding my head under a rock” or “avoiding responsibility and opportunity”?

            • XianZhuXuande says:

              @ArcanaJ: Because the teachings Dave Ramsey advocates result in a poor credit score (or no credit). You have to have significant income to get a mortgage under those circumstances and it is incredibly difficult to get a good rate, especially in today’s climate. Getting a bad rate on mortgage is a sure-fire way to throw buckets of money away.

              I pay cash for my cars too. Not everyone has that option.

              In fact, the only thing I would ever pay interest on myself is a home. I make regular use of credit, however. It makes my bills much easier to manage, protects me if a merchant tries to take advantage of me, and gives me an average of 1.5% back on my purchases-money you’re not going to be getting by using cash. When I do get a mortgage (I got out of the market when things started to go sour) I’m going to get top rates because I have excellent credit.

              Dave’s teachings may work for you, but preaching them to others is ridiculous unless the person you are preaching to is incapable of handling credit. If someone is responsible enough to treat credit with the same responsibility they would treat cash they will only benefit from understanding and making use of credit. Ramsey teaches people how to avoid the possibility of getting into trouble (teachings that have consequences) but his path is definitely not the ideal path for a responsible person.

              I’m glad it works for you, but spare the responsible adults from droning through it.

              • ArcanaJ says:

                @XianZhuXuande: First I was hiding my head and avoiding responsibility and opportunity, now I’m preaching and droning? Flatterer!

                Ok, so you don’t care for Ramsey’s school of thought, while I agree with a lot of what he has to say. To each his own.

                • AliyaBabasaur says:

                  @ArcanaJ: I read your blog post about your credit card situation and just because you can’t use a credit card responsibly doesn’t mean other people can’t. I’ve never paid interest on a credit card, but I’ve earned thousands of dollars on cash back rewards and developed good credit.

                  • ArcanaJ says:

                    @AliyaBabasaur: At the risk of depriving you of an “A-ha!” moment, I said early on in this thread that my knowledge was hard won. And it’s not as if I didn’t know that my public posts were easily found, for any and all to see.

                    But if believing that you have trumped me with some grand discovery about me makes you happy, then by all means, believe on.

                    • AliyaBabasaur says:

                      @undefined: @ArcanaJ: Oh No, I didn’t mean it like that. You made it clear in your comment here that you had made a mistake, but you kept saying that credit cards were “evil” and “not a good tool.” I’m making the argument that they are a good tool for people who use them responsibly, and that just because you weren’t able to avoid problems with credit cards doesn’t mean that other people can’t use them wisely and with good results.

                      I didn’t mean my last comment to hurt… i think you’re pretty cool…love the website and your art

                    • ArcanaJ says:

                      @AliyaBabasaur: Hey, it’s all good. And while I have my reasons for thinking that credit cards are evil (not the least of which is the crack-dealer nature of the companies behind them) I do understand that for some, they work and work well.

                      Sadly though, I believe that the actual percentage of (otherwise sane and rational) people who, through self-delusion or misfortune, find themselves in a world of trouble with credit cards, is pretty darned high.

                      I also believe that setting too much store by the much vaunted credit score is, to put it mildly, giving our power away.

                      And you last comment didn’t hurt, so no worries there. I just wanted it clear that I do usually try and own my stupidities. Hey, sometimes, their my very best work!

    • TVarmy says:

      @ArcanaJ: The point is that if you’re smart with them, they can help you get a better credit score, but you really need to watch your spending. My mom says I should use debit/credit cards like a checkbook, writing down every fine on paper after the transaction. I personally just have a Wachovia card, and keep paper reciepts in my pocket as a vague reminder of what I’ve done, and check Mint once or twice a week to see my situation. Being in college, I make income a very small amount of the year, so my balance varries widely, but I try to keep at least $300 around for unexpected expenses, especially for healthcare, since usually $150 to $200 is enough to tide a situation over until insurance problems work themselves out.

    • Jetgirly says:

      @ArcanaJ: Don’t be silly. I got my first credit card when I was fifteen and I’ve paid it off every single month since. I haven’t missed or been late on a single payment, and I’ve never paid less than the full amount owed. I use it for almost every purchase that I make. Until recently I’d been collecting cashback points, but now I’ve decided to pay $35 each year to collect Airmiles on the card, as it is connected to an airline I use several times each year. My credit card and I have been together for nine years now, and our future looks just as promising!

    • SabreDC says:

      @ArcanaJ: Some people also want the flexibility of making one payment at a specific time. I pay my card off monthly, but it is much more convenient for me to deal with paying one bill on the 9th of the month, every month, instead of going to the ATM when I need cash and trying to remember how much cash I spent so far. Plus, as someone said above, rewards are good. I get 1% cash back (not the best, but free money!) on all purchases. And I can initiate a chargeback if a company fails to uphold their side of the transaction… try that with cash.

  2. methamp says:

    It should also be noted that FICO changed their scoring model to make authorized user status not count toward your score. So it doesn’t help anymore.

    • VaniaNermin says:

      @methamp: Exactly. When I applied for my first credit card through my bank, they denied me based on no credit history. I had been an authorized user on my parents card for about 7 years, so my credit report showed 17 years of history (how long they had the card for), but when I called to ask why my 17 years didn’t count, they said authorized user status is meaningless since I wasn’t responsible for paying the bills.

    • humphrmi says:

      Stories of FICO 08 ignoring piggybacking when calculating score are erroneous:

      [www.bankrate.com]

      However, even though an authorized user still gets a FICO score up-bump, banks that do a hard pull will see the authorized user account flagged and will likely not consider it when determining credit worthiness.

  3. Brazell says:

    Eh, credit cards were pretty helpful for me when I was in college because I always had summer jobs and at the end of the semester, I’d always run out of cash. I would never have enough money for Christmas without my credit card, and I always got it paid off by the time I got my paychecks when I started working.

    Credit cards are very useful and valuable when you manage them wisely.

  4. bombledmonk says:

    I thought that piggybacking doesn’t work anymore. Weren’t the rules/laws changed to prevent that from happening?

    • AliyaBabasaur says:

      @bombledmonk: I thought the piggybacking that was illegal was where a third party (like a credit repair company) got access to people with good credit, who were total strangers to you, and you paid to piggyback on their credit. Is it also now illegal to piggyback on a parent or spouse? I found conflicting info when i tried googling

  5. kwsventures says:

    Do not get a credit card. Get a debit card of just pay cash. If you don’t have the money to buy something, you can’t afford it.

    • Bargaineering.com says:

      @kwsventures: While I agree with the your third sentence, I can’t agree with the second. Debit cards are far riskier than credit cards.

      • TVarmy says:

        @pfblueprint: Agreed. Even if you are careful to keep your number/pin secret, there are still problems. Overdraft fees will suck an account dry ASAP, and banks don’t go out of the way to get you a timely warning that you’ve run out of cash in your checking.

        However, if you never use your PIN at the store, you do get similar protections to a credit card and get to ride the float and possibly reward points, depending on your bank. I have a student debit account, so my rewards suck, but having 3 days until a charge goes through is generally a good thing, since it gives me more time to plan ahead if, heaven forbid, I run low and need my mom to get me some cash ASAP.

        • batsy says:

          @TVarmy: If you’re a responsible user of a debit card, you check your account status frequently online and therefore will know before you overdraft anything.

    • baquwards says:

      @kwsventures: Credit does not equal debt, period. Irresponsible use of credit equals debt. I use a credit card daily and don’t carry a balance and the card companies pay me hundreds a year in rewards for doing so. Debit cards are dangerous, would you rather have your checking account compromised or the bank’s money if your card number is stolen? I can tell you which will give the least amount of stress. If you use a pin for a transaction you will forfeit Visa and Mastercard’s protections, these only apply to signature transactions.

      • VoxPopuli says:

        @baquwards: I had $400 stolen from my bank account. The bank put the money back the same day, refunded overdraft fees that it caused, and started an investigation. It really wasn’t that stressful.

        • baquwards says:

          @VoxPopuli: You were lucky, not every bank is that prompt, many won’t know how efficiently their bank works until their is a problem. I know how visa and mastercard’s fraud protection works.

        • johnva says:

          @VoxPopuli: I’ve heard stories of it taking weeks or even months for people to get their money back, or even having to fight their bank to even do so. The problem with debit cards is that a) it’s your money that’s missing in the meantime, and b) how simple the process is depends entirely on your particular bank.

    • madanthony says:

      @kwsventures:

      I don’t agree with the third sentence either. Well, it’s true for most things, but there are some things – houses, cars in some situations, emergencies, promos like 0% financing – where it makes sense to take out a loan rather than waiting to have enough cash on hand. The thing is that you can’t take out a loan if you don’t have a credit history. Opening a credit card as a college student is a great way to do that, if you are responsible and pay off your balance in full and on time.

      I got my first card – a citibank mastercard – right when I turned 18 and went to college. I was responsible with it, built up a good credit history and that came in handy when I bought a house at 25 with a 750 FICO.

    • ScarletsWalk says:

      @kwsventures: I purchase almost everything with debit, check, or cash.

      But at the same time, credit cards are necessary and not having one poses serious problems and inconveniences, like renting a car or getting a hotel room.

      You can have a cc you don’t use often or much, but having one for emergencies is a good idea, especially if you’re a college kid miles away from home.

      I didn’t have one in college and I traveled lot and I still shudder what would have happened if I got stranded in an airport with $5 in my pocket, as I usually traveled. It would have been good to have it and not use it than to be without in a true *need* situation

  6. azntg says:

    As an undergrad college student who tries to be knowledgeable about credit, I’d like to add the following:

    Best practices for using a Credit Card (from a college student’s perspective):

    At this day and age, I’d be surprised to hear that a typical college student doesn’t know how to use a debit card, much less not have one to begin with!

    Therefore, I’ll say this: Treat your credit card like a debit card. Exercise self-control and spend WITHIN your means.

    Pay your bills in full, on time, every time and you’ll be ahead of the curve each time. Your wallet will thank you today (since you didn’t have to pay that hefty interest and other fees), tomorrow and a decade down the line (when your credit is built up well enough to qualify you for the lowest interest rate on that mortgage).

    It is a common misconception that many people my age have, but you do NOT have to revolve balances (carry balances across a statement cycle) to raise your FICO scores or to attract favors from your creditor. FICO scores are a proprietary secret, but the trend shows that those who do not revolve balances generally enjoy higher scores. Furthermore, in this credit climate, I’d go as far as to say that creditors are actually favoring those who pay-in-full, on time, every time.

    Arguments about Credit vs. Debit

    Why somebody should use their credit cards over their debit cards are widely debated. Aside from building credit (which debit cards won’t do), My viewpoint is that more legal protection and benefits are offered credit cards than debit cards. If anything bad happens after you use a debit card, there are very few legal (federal/state/local) protections available and you’re essentially at the complete mercy of your bank. Naive are those who believe that their bank will always “do the right thing.”

    The most frequent counterargument I hear about why somebody should not use their debit card is that people become irresponsible when they use credit cards. Truth be told, I’m still dumbfounded when somebody uses that argument at me.

    So, you’re telling me that if you’re holding a card that doesn’t have the words “DEBIT” printed on it, you become a moron and spend irresponsibly, yet when you have the same exact card with the words “DEBIT,” you suddenly become adept at finances?

    I say “same exact card,” because the card sizes are physically the same (both are ISO 7810 compliant), usage procedures are identical (in the United States: swipe and sign OR swipe and enter PIN) and you are ultimately on the hook for repaying the debt (debit removes that amount near instantenously from your bank account directly and for credit, you generally get billed at a predetermined time of the month).

    It simply does not make sense to me. It may make me look like a bigot when I say this, but to me, the argument is suggesting that either people are not vigilent, if not lazy outright. Either that or charitably speaking, there are more people with diminished mental capacity than they are willing to admit.

    Caveat about Piggybacking: It’s a great way to “inherit” age and tradelines fairly easily, but if you’re not careful, piggybacking can seriously damage your credit if things go wrong.

    If your parent adds you to an account with a checkered past, you inherit both the old age AND the negative history. And if you’re just starting out, that negative history might be enough to hinder you in your future credit pursuits.

    If your parent suddenly maxes out the card and stops paying, you automatically become a deadbeat too. Of course, with most credit cards, if you are an Authorized User, you personally are not liable. But creditors will try to dish out that damage on your credit file as well.

    • mac-phisto says:

      @azntg: you offer some good advice & i don’t mean to pick, but this information is flat out wrong:

      “in this credit climate, I’d go as far as to say that creditors are actually favoring those who pay-in-full, on time, every time.

      no way. actually, credit card companies make the most money off people with mid-range credit that charge close to their limit & only pay the minimum. while there is an opportunity to make money off users that charge & pay off in full, that income is negligible in comparison to interest charges & fees. cc companies use a variety of complex matrices to cherry pick customers that they know will utilize their card in this way. don’t believe me? take a look at how fair isaacs (creator of the FICO score) helps (pdf file) –> [www.fairisaac.com]

      If anything bad happens after you use a debit card, there are very few legal (federal/state/local) protections available and you’re essentially at the complete mercy of your bank.

      actually, the protections with debit cards are almost the same as those with credit cards. regulation e (“the EFT act”) is the main body of legislation that governs the level of risk a consumer is exposed to when using a debit card. & to be honest, that’s just the beginning – it’s a weekend & i really don’t feel like working today, so here’s a link – read for yourself: [www.federalreserve.gov]

      note that VISA-branded debit cards carry the same “zero liability” coverage as visa-branded credit cards, meaning you are not liable for any fraudulent activity for transactions that pass thru the VISA network. also note that i am not taking a stance on the debit vs. credit debate here; just debunking misinformation.

      It’s a great way to “inherit” age and tradelines fairly easily, but if you’re not careful, piggybacking can seriously damage your credit if things go wrong.

      as someone else already pointed out, piggybacking no longer affects your credit score, so becoming an authorized user doesn’t affect your credit at all. also, it would be against the law for credit card companies to damage an authorized user’s credit as they are not contractually liable & therefore are not legally responsible for the debt. negatively impacting a person’s credit for a debt they are not contractually liable for would be a violation of quite a few federal laws, most notably the FCRA & FACTA.
      ===
      you are far more advanced in your knowledge of these matters at your age. congrats, good luck in school & i hope this information helps.

      • mac-phisto says:

        @mac-phisto: that last part was meant to say “you are far more advanced in your knowledge of these matters than most at your age.”

        & sorry for the book. =)

      • azntg says:

        @mac-phisto: Mac-phisto, I appreciate your compliments and your corrections to my original statements.

        With the exception of the legal protections that pertains to debit card usage, I strongly believe that certain aspects of your corrections are based on outdated information. For that reason, I still stand by my original statements for the other two raised.

        - “Creditors are actually favoring those who pay-in-full, on time, every time”

        First off, I definitely will not dispute the part where you say that the credit card issuers make the most money from those revolving balances, those charging close to their limits, etc. Absolutely true. The interest and fees charged to a cardholder are inherently much larger in sum than the interchange fees charged to the merchants.

        However, I was speaking from a practical perspective in light of very recent events.

        I will refer you to the Marcus’ Credit Matters blog (once featured on a Consumerist article, actually). Here are two examples of what I’m taking about.

        Citibank’s Rate Hike Strategy

        American Express suspends Flexible Payment Option

        If actions such as American Express discontinuing Flexible Payments on their charge cards, Citibank ratejacking everyone to the low 20′s range, Chase raising minimum payments to 5% and charging $10/mo. fee isn’t an underhanded way to encourage PIF’ers (and discouraging those who carrying balances), I’d like to invite you to tell me what is.

        Thankfully, credit unions seem to be much better in that respect. But I’d still hold my breath on that one for now.

        - “As someone else already pointed out, piggybacking no longer affects your credit score, so becoming an authorized user doesn’t affect your credit at all…,”

        Unfortunately, you must’ve missed a subsequent reply that humphrmi posted.

        This is where you’re still running on outdated information.

        Initially, Fair Isaac announced that their new scoring formulation (FICO ’08) will disregard authorized users. I remember this quite well… it created quite a brouhaha in the credit discussion communities that I actively visit.

        Later in the year, Fair Isaac backtracked to a limited extent. They essentially stated that under certain circumstances, piggybacking will still be allowed (e.g.: piggybacking between family members)

        Once again, FICO scores are a proprietary secret, so I couldn’t provide hard evidence even if I wanted to. But from a practical standpoint, I know piggybacking is still alive. Some of my younger friends are reporting to me that it is still working for them (they’ve piggybacked long after word surfaced by Fair Isaac)

    • Outrun1986 says:

      @azntg: I tend to agree but I think its just people that have a lack of responsibility with the card. Parental involvement plays a HUGE role in how young adults spend their money and handle their money and handle credit cards. My mother taught me to save my money and not to overspend and even in high school I knew that not paying off the credit card bill was a very, very bad thing. They also taught us this in high school classes, I don’t know what they are teaching children these days but perhaps teachers are being paid to teach teenagers in high school how to spend money. My mother also pays her bill every month in full and checks the statement carefully so those practices have been passed down to me. I also was given a bank account at age 8 and had all my birthday and christmas money deposited into it, I was not allowed to spend it on clothing or Ipods (or the 1980′s equivalent) like many of today’s children are allowed to.

      If your parents do not set a good example and they hand you a credit card when you are 18 and they pay it off when you go overboard with it then you just learn that they will pay it off and therefore you keep overspending so that you can have more stuff to out-do all your friends. Eventually when they get tired of it (if they ever do) and stop paying the bill the young adult then has a lot of bad habits to overcome. Some people never learn and they just keep on spending and spending until they spend themselves right into a sea of debt.

      • azntg says:

        @Outrun1986: I don’t know what other parents do with their kids nowadays.

        Truth be told, my parents never really instilled that sense of responsibility directly to me when I was younger.

        However, I do have caring parents and in the absence of serious issues within our household, I did take note that they never have any kind of financial problems, even in unforeseen emergencies (unlike some relatives in my extended family and unlike some friends of mine). Figured that if I follow my parent’s lead, I would be fine.

        So far, so good :-)

        I can tell you that they certainly do not teach this kind of stuff in New York City public high schools. I personally graduated from Brooklyn Tech, a specialized science high school in New York City (which requires very basic screening and entrance exam for entry). They never taught us this kind of stuff.

        I’m currently a student-teacher in the NYC public high school system and I can tell you that all the high schools I’ve been observing and teaching in so far do not teach this either.

        • Outrun1986 says:

          @azntg: Our classes had the very basic, I went to a catholic school and we had business class which was basically how to write a check, playing the stock market with fake money, and some things about credit cards and interest rates. If I didn’t get it then I would have gotten it in college anyways, where business class is mandatory for almost any degree, but they don’t teach you the very basics like how to write a check and well, some people probably need to learn that even in college!

  7. varro says:

    Do they still have the classic “pay it off at the end of the month or else” Amex card?

    That was my first credit card, and I only used it for plane tickets to come home on breaks. All the fast food, movies, beer, etc. was paid for with student job money…

    • TVarmy says:

      @varro: I think they do, but I hear it’s awfully selective, and it still is not used often. Of course, the accounts have great features and buyer protection, so if your big ticket item places take it, then this is a good choice, and the few places taking it thing may be a feature, as it encourages you to spend less.

      • th1nwhiteduke says:

        @TVarmy: I’m sure the company’s goal is to encourage you to spend less.

        • azntg says:

          @th1nwhiteduke: On the contrary, American Express actually wants you to spend more with their card.

          However (and this was almost always contrary to some of the other credit card issuers), American Express would like you to pay off your purchases on time.

          AFAIK, they traditionally maintained and still maintain a “spendcentric” model, where the bulk of their expected revenue (for charge and credit cards) comes from the merchant interchange fee. Of course, the merchant interchange fee is rather high and processing is somewhat finnicky, hence many merchants do not accept Amex cards.

          I hear that Visa Signature cards can sometimes cost even more than Amex cards to process *shrug*

    • ecwis says:

      @varro: Yes, they do. They are the AMEX Green, Gold, Platinum, and Centurion cards. The cards’ annual fees are $95, $150, $450, and $2,500 respectively.

  8. ajlei says:

    Well, isn’t everyone always saying that big purchases should always be done with a credit card, so that the option of chargeback et al. is available?

    • ArcanaJ says:

      @ajlei: Debit cards offer the same purchase protection.

      • batsy says:

        @ArcanaJ: Debit card don’t have chargeback….. do they?

        • Parting says:

          @batsy: Nope. no such thing on debit!

          • azntg says:

            @Meltdown: Indeed.

            If you are actually able to “chargeback” on a debit card, be aware that it’s a courtesy offered by the bank.

            • deadspork says:

              @azntg: From what my Credit Union told me, they can issue a charge back on a check, or on a electronic funds transfer, but not on a debit or credit transaction unless I file a police report.
              Now, I have a book I bought off the marketplace on Amazon.com which arrived completely destroyed, and I don’t know what my recourse is. I don’t want to file a police report over $4.00, but I also don’t want to get screwed or allow the merchant to screw others.
              Any advice? Can I dispute this with MasterCard directly? It’s a mastercard debit card. Can I dispute this with Amazon? I’ve gotten NO response from the merchant.

              • RandomHookup says:

                @deadspork: Was this really a case of the merchant insufficiently packaging the book? If so, ding on Amazon feedback, especially if they don’t respond.

                Was it the US Postal Service feeding the book through a shredder? Don’t blame the merchant. Amazon doesn’t give Marketplace vendors enough margin on their books (especially one you bought for $4) to cover postage, materials AND insurance. And there is no way for you to request insurance on your orders as a buyer.

                To be honest, if it looks like no one was trying to rip you off, consider $4 a cheap gamble on getting the book you wanted.

    • mac-phisto says:

      @ajlei: it really depends on the card. generally, you don’t have the same rights with a debit card. you are still covered in the event of fraud, but you may not have the right to chargeback due to dissatisfaction & you most certainly don’t have the same extended warranty offerings that some credit cards carry.

      @deadspork: i think your only recourse is to give the seller a negative review thru amazon & perhaps contact amazon about the offending merchant.

  9. coreyander says:

    Hmmm… I don’t know if I really agree that Citi deserves any free advertising right about now. Not to mention that the insipid mtvU credit card gets enough free publicity at campuses around the country without the help of consumer advocacy blogs. Maybe it’s just that the “PSAs” that mtvU runs (ostensibly about good credit) pushing the Citi card make my lunch hour a much more cynical time of day than I’d prefer, but I have to imagine there are better cards to recommend for college students than the same one that is marketed to death already.

    That said, the disclaimer is much appreciated!

    • sponica says:

      @coreyander: USAA has a pretty decent student credit card. I believe the limit starts at 250 or 500 dollars your freshman year, then increases each year by 250 dollars. I believe at age 23 it converts automatically into a regular credit card. So my limit of 1250 went to 3500 overnight. It is nice to have that high a limit in case of emergencies.

  10. Counterpoint says:

    I can speak from painful experience – it is not hard to get a credit card as a college student, and by all means avoid getting one except for a single “rewards” card that you pay off every month.

    I had a few credit cards that they literally gave away to college students with a slinky, tshirt, etc, and ran up a decent balance in college. I thought everything was great because I had a good paid internship and a “guaranteed” job after college… and then 9/11 happened.

    Anyways, moral of the story for college students (and really anyone) should be to have a rewards card that gives you cash back or gift certs at your favorite retail establishment and use it as a cash proxy for purchases / bills, and pay off that balance every month. That way you’re still living within your current means, and getting extra rewards for your purchases.

    Just don’t get into the habit of saying, “well I’ll pay it off next month instead” because that’s a sure-fire way to start the problems.

  11. Dan W says:

    I had a credit card even in high school. In college I think I had like $75k credit line between my cards and had to constantly call them to reduce my lines of credit. In retrospect I shoulda charged like crazy when I was <18.

    I remember when I was a freshman in college and got a Sam’s Club membership the worker was making fun of how young I was but quickly shut up once they saw I was pre-approved for a Sams card for $15k haha.

    No wonder the economy is where it’s at with loose lending standards and people’s desire for instant gratification and irresponsibility. I’m glad credit/lending is starting to tighten.

    • supercereal says:

      @Dan W: What company in the world extended a $75K limit to a high school/college age kid? I don’t even think I know any fiscally responsible adults with a long credit history who have that much…

      • azntg says:

        @supercereal: American Express actually extended a ~$75k limit (on a single credit card) to a friend of mine while he was in college.

        He’s a pretty smart guy, who’s earning good money (certainly more compared to most people in the 18-23 age bracket). Recently graduated with a nursing degree.

        Last time I checked with him, the line is still intact too!

  12. ohnoes says:

    My first card was a secured card with 300 bucks on it. That was three years ago. I’ve paid off every bill in full, had my credit limit increased almost fifteen-fold (but never hit it), and qualified for loans without a cosigner because of it.

    Credit cards are extremely useful financial tools, but if you can’t handle money, leave your wallet at home. I find I blow through cash much more quickly so I don’t usually take it with me.

    They are also much safer than debit cards. Try doing a charge back with a debit card. If someone steals your debit card, the money they spend is pulled directly out of your account – you lose, at least initially. If someone steals your credit card, it’s pulled out of someone else’s, and your cash is still safe.

    Internet shopping – almost ubiquitously it is said not to use debit cards on websites because of the gross security risks. Since you can save money shopping online, this is another advantage of using a credit card to leverage your financial resources.

    Rewards – apart from “Keep the Change” which is ridiculous unto itself, debit cards don’t offer any. If you leverage your credit card rewards you can get benefits without having to pay for them (cash back, etc.)

    Building credit – there’s a debate on whether one should rent or own a house, which I won’t get into. Same with cars – some people like buying with cash, and that’s great. Say you want to start a business, however. Likely you will need a loan. If you have no credit built up, good luck qualifying for one.

    I am for credit cards because I knew what I was getting into when I went to my bank to ask for one. Those who call them “evil” are grossly mistaken, among other things that I won’t bother typing here.

    • deadspork says:

      @ohnoes: I get $0.10 per transaction on my debit card, and since I use it for EVERYTHING (including very small transactions throughout the day – a coke here, a sandwich there, etc), so I kind of like it. It’s December, and in January they’ll be sending me a check in the amount of about $75.00. Maybe it’s not as much as I’d earn with a CC, but these are transactions I have to make anyway, and I’m not digging a debt hole with this account (my other accounts, on the other hand…)

  13. scootinger says:

    I applied for the Citi mtvU card a couple of months after I turned 18, and they sent me a card with a $2000 credit limit. Shame on Citi…yes, I’m responsible with my credit, but a lot of people my age would probably go to the mall and max out the card after seeing the magic $2000 number. And as a 19-year-old sophomore in college, through applying for CCs and credit limit increases, I’ve managed to get $20,000 in unsecured credit in 5 credit cards; $14,000 of that is with JPMorgan Chase. (note that’s credit, NOT debt!) And that’s not even with a cosigner or anything.

    What the fuck are they thinking? How on earth is it right that a 19-YEAR-OLD COLLEGE STUDENT is able to get over $20,000 in high-rate unsecured credit cards? Is it any surprise that our nation is having a credit crisis?

    • Anonymous says:

      @scootinger: I had the same thing when i started college this year. I got a part time job at the local mall and decided to get a Citibank student credit card. They approved me for a 3000 credit line and I was in shock. I was hoping for a 500 line. I put down that my annual income would be around 8000. I have done well with my credit card but I can only imagine some of the other people who get that kind of large credit line and instantly go into debt for years.

    • ultimatecardsfan says:

      @scootinger: I’m 22 and also have the Citi mtvU card (great card and great company, btw) — I applied for it my senior year of college, and it came with a $4,000 limit that has since been bumped to $5,500. I’ve had another card since I was 18, and I also have two more cards, totaling $16,600 of credit line.

      But I pay my bills every month and don’t carry a balance — it’s really not that hard to not be a financial deadbeat. Don’t spend more money than you have … bills come … you pay them. I will say, however, that most people my age can’t functionally do their own taxes on an EZ form, so I can see how they lack the self-control to be smart with credit.

  14. tingeyga says:

    There is another option to use when getting your first credit card: Have one of your parents be a co-signer for it.

  15. morganlh85 says:

    Why is all the text bold now? I don’t like it.

  16. 89macrunner says:

    im 20 and i have had two credit cars. I started with guitar center credit card. no interest for a year.

    I then got a chase platinum card and have no interest for a year again.

    Its really easy to build credit history when you have no interest to pay!

  17. bubbledumpster says:

    My parents are dead beats….

    Thanks for rubbing it in.

  18. yevarechecha says:

    I’m 21 and had no trouble getting a Visa card from Wells Fargo on my 18th birthday. My parents insisted that I get a card to start building a credit history while I was still young enough that they wouldn’t feel qualms about bailing me out should I demonstrate stupidity in managing my finances (yes, I’m a spoiled upper-middle class college student). I’ve had the card for 3 years and have a FICO score in the low 700s. I’ve followed only 2 rules:

    1. Don’t charge more on the card than you have in your bank account.
    2. Pay the bills on time every month.

    Hasn’t failed me yet. But I’m also one of those “expect the worst” people that gets nervous if my checking account dips down near $500. It’s probably stupid to keep that chunk in there just sitting and not earning interest (I have one of those HSBC online savings accounts too) but the $15 in interest I’m not earning by leaving it in checking is worth my peace of mind. At least that’s how I rationalize it.

  19. Anonymous says:

    Best advice I’ve ever heard for getting a credit card: go to a credit union. If you have as little as $500 cash you can get a secured loan (basically, a loan to yourself that you pay off) and after you’re done you get a credit card. That’s what my lil bro is doing since he doesn’t have enough credit to get a card. It’s a shame that so many people don’t take advantage of local credit unions.

    • johnva says:

      @CassandraAstydameia: Their credit cards generally suck if you’re trying to maximize rewards. They often have low interest rates compared to commercial bank credit cards, but that’s totally irrelevant to me because I would never carry a balance on a credit card. Rewards are the main reason I use credit cards for everything (I get a LOT back), so I go to whoever gives me the maximum in cashback.

      • deadspork says:

        @johnva: People who get a secured card do so because they don’t have credit, so therefore they can’t get a regular rewards card.

        Credit unions are great because they won’t give you money unless they’re sure you can pay it back, unlike banks that dish out cards willy-nilly. A few years ago when I got my first credit card, my CU offered me a $500 credit limit. Chase gave me $3500. Hmm!

        • johnva says:

          @deadspork: From the perspective of upping your credit score it’s not “great” for them to offer lower limits…it’s bad. It all depends on what type of credit user you are. If you can’t deal with the temptation and tend to carry balances, by all means go for a credit union credit card. They’re a great option for those people. For the people with a high credit score who don’t carry balances, they’re not.

  20. lhfan04 says:

    I have a Chase +1 Credit Card which is basically the card they give to college students. I think it has a $600 spending limit on it. Anyways I just use that mainly for online purchases and bigger purchases at stores. I just use it to build my credit, and I always pay off my balance at the end of the month.

  21. jlayman920 says:

    I just got laid off at Citi but I can tell you that as long as you have a pulse, are actually in school and they can verify your address, you can get a Citi college card (Citi MTV U card). You don’t even have to have a job.

  22. Dragonis says:

    I think I might get one to pay for my books next semester. I have the money, its just I dont want to have to wait in line again. I need a credit card to buy them online and I don’t want to drag my parents down to campus.

    • Bargaineering.com says:

      @Dragonis: Buy them used online… places like Amazon (and many others) have books really really cheap.

      • Dragonis says:

        @Blueprint for Financial Prosperity:
        Most of my textbooks for next semester will end up being compilations assembled by the professor, available at the university store. The way I see it is this. I have my first year of tuition paid for, my job easily covers my cellphone bill, which is my only bill I need to pay, and I have the money. I was also mainly using this as a way to get a good credit score early on.

  23. RosalbaShard says:

    I was added as an “authorized user” to my parent’s credit line… but they’ve used the credit card since the 1970s (before I was born). Last time I checked my credit report, there was a flag that said credit was established before my DOB…

    Should I worry?

  24. satoru says:

    Well I can give you my personal experience at getting my first credit card in America. Mine was especially daunting. I had come from Canada to start a new job and apparently, the credit card companies think Canada might as well be Nigeria when considering your credit history. It took tons of mailing back responses demanding that they look at my credit history in Canada before Chase gave me a break and gave me a $500 student credit card. And this was a good 6 months after I started applying. So it was very frustrating.

    Ironically once you get ‘rolling’ in this respect, it is pretty easy to increase your credit limit or get other credit cards. It’s just the initial one that seems to be very difficult. You also have to be careful to apply to only ones where the issuing bank might have a branch in Canada. Overall it was a pretty tiring ordeal. Maybe having an Amex in Canada might have allowed me to get an American Amex easier but I’m not sure.

  25. forgottenpassword says:

    Back in the day when I was about 19 I couldnt get a credit card to save my life! Solely because I had no credit history. The only way I did it was by getting a sears card. And then later a discover card. THAT seemed to open up the gates for me.

    This of course was before they started handing out credit cards to broke college students like they were candy.

  26. Anonymous says:

    I am a college student and this past summer I got my first credit card through Bank of America.

    I did this for 2 reasons
    #1- I wanted to establish credit
    #2- Because through my internship I typically have to expense things (plane tickets, meals, software… various other things). As a college student I dont have 2 or 3 thousand $$ laying around in liquid assets that I can use if I have to book a coast to coast round trip flight at a drop of a hat.

    @ deadspork what debit card do you have that allows that?

  27. SuzieBee20 says:

    I had a hard time getting one. I’m 23, stay at home mom to two (Yes, I know… we started “early”) and I’m not a student any longer. I am authorized to use my husbands card, and have one with my name on it, but I wanted to build my OWN credit in case anything were to happen to my husband down the road, so I wouldn’t have to start from scratch.

    I applied at our bank, but was shot down, even for a secured card, because I don’t have any income and they would not allow me to count dh’s. Then I tried one of those applications from Capital One that I got in the mail and it was easy as pie. I expected to get a phone call asking about my income, but they mailed me the card, no questions asked!

  28. LadyHeather says:

    Man, I would have killed for a credit card when I was at university. I only ever would have used it for two months of the year. I got my loans in two allotments and they never came in time to pay for everything at the beginning of the semester. So I would eat nothing but rice for two weeks just so I could buy my books and pay rent and tuition. I never even qualified for a student card. :(

    I got my first card at 25 years old. I had just got married and I was already a homeowner. Haha. Tip for Canadians – PC Financial. They will take anyone.

  29. opsomath says:

    If you can’t qualify for a “normal” credit card with decent terms, something you might look at is one sponsored by an organization of which you are a member. For instance, I got my first (a MBNA-now-BoA card) with no fees, a 30 day grace period, and a 7.5% APR at age 18 with no credit or employment history because it was sponsored by the American Chemical Society (I was a chemistry major).

    Might be a better thing than a secured card. At least you get to hold onto your cash.

  30. SJRNWT says:

    I lol’d at the pic…

    I just turned 18, and I’m in college. Despite the fact that I don’t want or need a credit card, I’m going to get one. I’m going to use it for all my regular expense, and the only reason why, is because I want to have a good credit score, and AirMiles.

    Just my opinion…

    PS: I have no clue how stupid some people can be when it comes to credit cards.

  31. Anonymous says:

    Regarding the benefits of debit cards: when making a debit purchase there’s a big difference between *signing* and using your *pin.* If you sign, then VISA or MC (whichever appears on the card) processes it, gets a cut of the fees, and offers some benefits. When the teller asks “credit or debit” you can say “credit” and sign away. You bank often has promotions to use the *signing* method, because of the extra merchant fees.

    If you use the *PIN* then VISA/MC do nothing and it’s a simple EFT with the bank. This costs the vendor much less, and you don’t get any of the benefits associated with Visa/MC.

    I don’t know what bennies you might get with a *signed* debit purchase—probably depends on your bank.

    FWIW, I got a check card when I was 18, used that exclusively for a couple of years, and then got a credit card to start getting cash back. Since then I’ve paid in full every month (except for straight forgetting a $40 bill once and transposing two digits on my remittance another time).

  32. superhalo says:

    just applied to the Citi MTVU card. I’ve been wanting to get a card to build up a credit history, and my debit card is too overused. They have a decent rate, I’m just interested to see what the credit line is.

  33. rochec says:

    Here’s some good advice. Don’t.

    Or at least don’t ever use the card. Credit cards only cause you to pay more for an item than it costs.