I fundamentally believe everyone over 18 should get a credit card. No seriously, I will say I actually rushed out to get a credit card before I got my driver’s license.</p>
I feel like credit cards are always given a bad rep. Like they’re tiny slices of plastic that let you spend too much on designer jeans and quickly lure you into a trap full of debt Confession of a Shopaholic style. Yes, it’s a lot of responsibility because when you realize you have the power to spend money you don’t have in your bank account some people tend to get a little crazy. But you need to remember your name is on the line. Literally. Your reputation will precede you when it comes to credit cards so think about the future you each time you decide to swipe, tap, or chip.
You may be thinking, “But I have no money, isn’t getting a credit card irresponsible?” I disagree (only if you’re being hyperbolic, of course). In fact getting a credit card at 18 could potentially make buying a car or a house a lot easier: it all comes down to credit scores.
But what really is a credit score? Well, think of it as a grade which represents how risky you are to lend money to. It’s basically a number (sometimes a letter) which tells credit card companies, banks, and other financial institutions how likely you are to pay them back on time based on your history of, well, paying back credit card companies, banks, or institutions on time. The better your score, the lower a risk you are. And the lower a risk you are the more benefits—this could mean lower interest rates or a higher credit limit. As time goes by your credit score across the years can be recorded in a credit report which is pretty much a transcript of your credit history (and like a transcript you have to pay to get an official one). It is also a handy document to have when applying for a loan.
For a student with no credit history (if you haven’t borrowed money in some other way yet) a credit card is one of the most accessible ways to start building your credit history. After all, if you get a card at 18 and pretty much always pay your bills on time until say, 28 years old. You’ve got a solid 10 years of healthy credit behind you. That’s the kind of thing say, a mortgage broker, will appreciate.
Yes, I am giving you financial tips based on the chance you might want to buy a house in about a decade. This is what adulthood is like. But actually, a good credit score can be helpful for other types of loans too like car loans and even OSAP if you’re applying for a second time. (P.S. If there’s anything you should be a little scared of, it’s student loans. Don’t treat them like they’re not a loan because they are and it will affect your credit score. Then how will you buy that townhouse?)
If you’re worried that maybe you’ll make some bad decisions and spend too much with a credit card, don’t be. How you handle a credit card all comes down to perspective. The trick is not to think it is a tiny gateway to unlimited funds (which it isn’t ever, even if it feels that way) but a way of building up your credit score for the future. Each time you pay your credit card on time you show the world you’re an adult who pays back his/her debts. Make it less about spending in and of itself, and more about financial health. And remember, your name is on that card and it will haunt you for the rest of your life.
You don’t have to use a credit card on big expenses either. I admit that when I first started using my credit card I was afraid to rack up a bill any higher than $100. Now, with a more regular income and firmer understanding of my own expenses I don’t mind spending a little more. Never think you have to max out your card. After all paying your bill on time is what counts! Keep it to a level you can pay back. Then slowly but surely you will become an adult who actually thinks about things like mortgages. Plus, I will add it feels pretty boss when you call your credit company and ask them if you can increase your credit limit and they basically entrust you with $5,000. Just saying.
