A credit card can be the key to getting your own place or car someday. Misuse it, and you could get into debt that takes years to work your way out of.

 As scary as it might sound, it might be time to look into applying for a credit card.

“You know when you’re ready to take on that responsibility,” said Brenda Harmon, supervisor of loan originations at New England Federal Credit Union. “If you’re going to pay attention to your bills, you’re not going to your parents for everything, you’re able to handle money wisely, you might be ready.” 

Young people should make sure they understand exactly how a credit card works before getting one, said Sara Varela, communications and development director at Consumer Credit Counseling Service of New Hampshire and Vermont. 

“A credit card is basically a loan that you have to pay in full, plus you have to pay interest, which is what credit card companies charge you for lending you the money,” Varela said. “The longer you take to pay off the loan, the more you’re going to be paying.” 

Vermont native Jess, now 25, who requested that her last name not be used to protect her privacy, got a credit card when she was 19.

“I just started using it, like, $5 at a time,” said Jess, who didn’t have a job at that point.

 “I would just pay the minimum payment,” she said. “I didn’t know that if you only pay the minimum you’ll never pay it off, because it has interest.”

Jess ended up maxing out her card and owing about $1,600, which took her two years to pay off.

“At the time, it seemed like a million dollars,” she said.

If you decide to get a credit card, do some research about how it works, and talk to your parents or someone at your bank, Varela said. She also stressed waiting until you have a steady job. 

Getting a card

The main reason to get a credit card is to build credit history, Harmon and Varela said.

A good credit score doesn’t just help you get loans. Everyone from landlords to potential employers to insurance companies check your score.

 “It’s the three most important digits in a person’s life, ever,” Harmon said. “It will drive your future in a way you can’t even envision. It’s the difference between getting what you want and need and not getting anything.”

Your credit history helps people who don’t know you get an idea of who you are, and whether you’re worth taking a chance on, Harmon said.

The Credit Card Accountability, Responsibility and Disclosure Act, or CARD Act, which begins February 22, 2010, says you have to be 21 to get your own card, unless you are financially independent from your parents.

If you’re under 21, you still have a few options.

Someone can co-sign your application, which essentially means they will pay your bills if you can’t. You can also become an authorized user of your parents’ card, meaning you can use the card, but are not responsible for the bills.

Just like any big purchase, comparison shop for the right card. Compare benefits, interest rates, fraud protection policies, and more. Always ask for the full disclosure and read through it carefully.

Using your card wisely

If you do get a card, experts suggest starting out cautiously.

“Every time that card swipes, say to yourself ‘money just left my wallet,’” Harmon said. “You don’t want to ever lose touch with actual paper money. Think of them as the same thing.” 

For the first few months, experts say you should use the card only for things you need, and only if you have enough money to cover the purchase. Always pay the full balance, and make sure you pay on time.

If you can handle that, you can start using it for some things that you want. Just make sure you have enough cash to pay it back, Harmon said.

“Start off strict with yourself, only buying needs that you can absolutely pay off, then ease yourself into buying things you want instead of just need,” Harmon said. “The biggest mistake we see with young adults is impulse buying. Worrying about paying for it later always catches up with everyone.”

 

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