By: Revanche

A light credit card primer for young relatives

September 3, 2009

*Slightly edited for public consumption. This was written for a young relative who had never before evinced interest in the financial world, not even in the spending of money. Said relative approached me asking for some guidance on which credit card to get as the age of 21 was fast approaching and, ambivalently, “perhaps it’s time.” *

Dearest Relative,

Once upon a time, I used to earn extra bonuses when applying for new credit cards; if you applied through their site, they’d offer to pay you an extra amount of cash (from $10-$75) depending on the card. I’ve gone through it and I don’t see any good cards with an extra freebie this time so I’m going to say, for your purposes, the Citi Forward card is good.

Read the two following posts on the cards for more on what is offered, what you need to do, and how to max out the benefits of the card:

Jonathan’s guide to $100 bonuses from credit cards (accessed 08.15.09)
Jonathan’s review of the Citi Forward card

If you were willing to take the extra time (probably 30 minutes total over the life of the deal), I would suggest applying for the AMEX Starwood at the same time as the Citi Forward. If you get approved: activate it, make a tiny tiny purchase of a dollar or two to generate the bonus points, cash the points out, and call to cancel the card a few months down the road. It’ll nab you an extra $100 of spending money right off the bat. Not a bad thing to have in the wallet since gift cards don’t expire in CA.

As you get older and start using cards more regularly (and responsibly! I have to add that, you know that), I would recommend that you pick a second and third back-up card just in case there are problems with your original card.**

A few reasons this is worthwhile: as long as you are responsible with your spending, it’s a fantastic back-up for purchase protection. If you were overcharged for something, and discovered it when you got home, you can be outta luck if you paid cash and the store refuses to acknowledge the mistake.

Building your credit history with just a few cards (you just have to have them, pay them in full, on time, don’t believe that BS about having to carry a balance to build history) is useful. And the longer your credit history is, the better it is. It takes years, so this is a long term issue.

Another side of purchase protection: safety! It’s not safe for you to carry tons of cash, and checks can very easily expose you to the risk of identity theft/fraud since your name, address and sometimes phone number are all printed on the check. If it can happen to Bernanke’s wife, it can happen to you! When you’re making a big purchase, you can put it on your card and pay it off when you get home.

** For example, my go-to credit card was out of commission when I was on my cross-country trip, I had to wait 7-10 business days for them to send the new card. I had other cards I don’t use as much but ready to go in my wallet so I didn’t have to withdraw a ton of cash or carry a debit card and lots of cash on me while traveling in the city. The great thing about American Express cards, at least before the recession, was that they would always overnight you a replacement card free of charge. I don’t know if they still do now, but it was a cool and handy perk.**

As always, the key tenets to using credit cards responsibly is to make sure they work for you by not carrying a balance and being subject to interest charges, always pay on time to avoid late fees and two-cycle billing (to be explained at a later date), and be certain you have the cash to cover the charge.

When you’re ready for more financial basics, let me know. I’m more than happy to whip up more cool sensible advice you want to hear. 😉

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