Many milestone moments signify the transition from childhood to adolescence to adulthood: your first sleepover at a friend’s house, passing your driver’s license exam and getting your first credit card.

While you may have learned about sleepover expectations from movies and taken driving lessons at school, there aren’t many resources available to young adults for selecting the right credit card.

In this episode of Headlines and Fine Print, PACU President & CEO Dion Williams emphasizes the significance of carefully reviewing the fine print when selecting the right first credit card for you.

Credit card companies like to market perks such as airplane mileage, cash back and customization, which are all great features, but you have to pay close attention to the card’s rates and fees.

Obtaining a credit card is typically your first step in establishing a credit history that will last a lifetime. Therefore, ensure you understand what you’re agreeing to. The terms and conditions are more important than all the additional features.

“Your credit history matters greatly for your life,” Dion says. “For example, when you apply for employment or a house or a car loan later in life, your credit history factors greatly into whether you get the job or qualify for that loan, so be sure to pay on time and don’t carry balances if possible.”

How to best use your credit card:

• Make your payments on time.
• Keep the card open.
• Don’t max out your credit limit.
• Avoid carrying a balance.

Rates and Fees

If you don’t carry a balance, the interest rate on the card doesn’t matter. Rates come into play if you carry a balance, because if not paid off promptly, a small purchase can take years to pay off and become more costly than originally intended due to interest.  

Another tip is to avoid cards with annual fees. There are cards with all the fun bells and whistles that don’t have annual fees. Some fees are penalties for exceeding your credit limit or paying late. While you can choose a card that doesn’t have a yearly fee, you can prevent penalty fees through your actions.

Debit Cards vs. Credit Cards

Debit cards are convenient for everyday expenses like gas and groceries, but credit cards are more suitable for larger purchases, such as airline tickets and hotel reservations. Additionally, some transactions, such as car rentals, require a credit card because debit cards are linked to checking accounts, which can have balances that change daily.

Fraud prevention is another reason to opt to use a credit card. Credit card transactions can easily be tracked and cancelled without disrupting the funds needed for daily purchases in your checking account.

Cosigners and Secured Cards

While many credit cards designed for students or first-time cardholders may not have as many perks, cards that require a cosigner or secured cards are alternatives for beginners wanting a few more rewards or higher credit limits.

Having a card with a cosigner means that the card, credit limit and payment history reflect everyone’s history.

Secured cards are when money is deposited into an account and held as collateral on the card. Picture this: You have a $1,000 credit limit. Then you have an account with $1,000 deposits to secure that card. Even though you have the deposit account backing up the credit limit, making on-time payments is still essential. Secured cards are great for those trying to build credit for the first time or rebuild credit if there have been past credit blemishes.

Getting your first credit card is an exciting milestone, but it comes with much responsibility. While they can be beneficial, how you use them can affect you for many years. Your credit history is with you, impacting your ability to get a job, buy a home, buy a car and more.

That’s why choosing the right card for you is key. “Use it responsibly and let it be the beginning of a long, positive credit history,” Dion says. “Your credit union is here to help you with that process.”

Ready to Find the Right Card for You?

Check out our PACU credit cards. Find the right card to pay down balances faster, maximize cash back, earn rewards or build your credit history.     

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