Everything you need to know about credit cards
My name is Bryan Pietsch, and I'm a senior at ASU studying journalism and business. Outside of class, I'm in a business fraternity, Delta Sigma Pi, and I like to travel and ski. To afford those hobbies, I've taken up another hobby: strategically using credit cards to gain valuable rewards.
I got my first credit card when I turned 18 so I could start building a credit score (more on that later). Since then, I've spent a lot of time researching and using blogs and videos to learn how to use credit cards responsibly and to get the most bang for my buck.
I've amassed a significant amount of cash back, travel money and airline miles through credit cards. With these rewards, I've been able to fly across the country multiple times, get free hotel stays and even pay off some of my monthly bills — just by spending money. If you learn how to use the money you already spend on everyday things like books, food and rideshares in a responsible, strategic way, you can earn rewards, too. Here’s how to get started.
What is a credit card, and why should I get one?
You probably have a debit card through your bank, or you might be a cardholder on your parents’ account. But those cards don’t earn you points, and they won’t help your credit score (more on both of these topics below).
A debit card pulls money out of your checking account directly — it doesn’t impact your score because you aren’t borrowing any money. And if you are a cardholder on someone else’s account, it’s impacting their credit, not yours.
If you don’t have a credit card, you’re not building your credit, which is important for being able to get larger loans for things like homes and cars. You’re also missing out on free money through cash back and sign-up bonuses when you get new cards.
What is a credit score?
A credit score is a number that is used to determine how likely you are to repay debts, but there's a lot more to it. Let’s start by saying it’s important and something you need to keep an eye on.
There are a variety of things that can impact your credit score: how long you’ve had credit cards or loans, how much credit you use, how many times you apply for credit cards or how often you have your credit checked (like if you’re applying for a loan, getting a background check, applying for an apartment, etc.).
One of the biggest things that impacts your score is how much of your credit you use. It’s a good rule to spend only 10 percent of the credit available to you. For example, if you have a $1,000 credit line, spend only $100 per month and pay it off every month. If you get another card with a $1,000 limit, you can spend $200 for the same impact on your score.
Each time you apply for a credit card (what’s called a “hard check”), it will impact your credit score — but only slightly. As a baseline, avoid applying for anything requiring a credit check more than once every few months. The average “age” of your credit history also affects your score, so try to keep your cards for a while and don’t cancel often, especially your older accounts.
How to check your credit score: There are a lot of ways to monitor your credit score, and it’s a good idea to keep an eye on your credit over time. Your credit card company might be able to give you a monthly credit report, but there are also a variety of free apps and websites that will do that for you too. Don’t worry — this will be a “soft check” and won’t impact your credit score.
How do I get my first credit card?
If you don’t already have a credit card, you probably don’t have a credit score (unless you have loans in your name). It’s usually easiest to get your first credit card through your bank, because they have a history with you, can see your accounts and can check how often money gets deposited. Many banks understand that you have to start somewhere, and that you likely won’t have a credit history when applying for your very first credit card.
To find a credit card that’s right for you, search your bank’s website (you can also call or visit), or search online for the best credit cards for college students. But don’t sign up just because of a few good reviews — do your research and assess your needs before you apply. If you travel a lot, look for a card with good travel rewards. If you spend a lot on food, get a card with good dining rewards. The rewards are where the credit card will work for you, so keep that in mind when making your choice.
How can I make the most of my spending?
Now that you have your credit card, start using it to save your money! The easiest way to do this is to start using your card AND paying off your bill each month in full. Rewards tend to come in the form of points or miles (earned based on how much you spend), and many cards let you convert points to cash back, which for me has been the best way to claim rewards. If your card allows it, you can funnel the cash back toward your credit card account balance.
But be responsible. It’s important to view a credit card as a vehicle for spending money you’d normally spend, and not as a way to go wild on big purchases you can’t afford. You can end up saving a ton of money without even thinking about it by doing this, but if you misuse your card, you can end up with a huge problem.
And watch out for interest and fees. Many new credit cards won’t have an annual fee for a certain period of time as an introductory offer, which means that as long as you don’t pay interest (by paying off your total balance due each month), there will be no additional fees from using the card for a period of time (but be sure to plan ahead for when the offer ends).
Interest rates usually range from around 15 to 30 percent Annual Percentage Rate, which means the credit card company will charge you that percentage of interest on whatever you don’t pay off that month. Learn more about how and why credit card interest is charged before you start spending.
To avoid getting charged interest or fees — and finding yourself in a pile of debt — be careful to use your credit cards responsibly. One way to do that is to spend only as much as you have currently in your bank account. While your credit limit (sometimes called a credit line) might be higher than what you make per month, it’s important to only spend what you can afford. It will help you spend within your means, improve your credit score and help you earn rewards.
This was helpful, but how do I learn more?
There are a lot of additional resources that will teach you about credit scores and credit card reviews. If you spend a little time researching, it can pay off big time.
Here are some great sites to help you get started with credit cards.
If you’re struggling financially, talk to ASU’s financial aid office about options for help and guidance.
Each person’s financial situation depends upon individual circumstances. Therefore, the information in this article is intended to serve as introductory financial information. Financial professionals should be consulted for personalized advice.
Story by Bryan Pietsch, Sun Devil Storyteller