Congrats — you just got yourfirst credit card! As a young adult, this is an important first step in your financial journey.
With a new card in your hands, it’s important to know that what you do now can impact your financial outlook in the future. How you choose to use your card, your spending habits, your ability to budget and pay bills on time are all essential to agood credit scoreand your overall financial wellness.
In this article, we will review:
- What to know before getting a credit card
- What kind of credit cards are recommended for young adults
- Things to look out for with your first credit card
- Tips after getting your first credit card
- How to build good financial habits with your first credit card
- Chase credit cards that could make a good first credit card
What to know before getting a credit card
Like anything in life, actions have consequences. When it comes to credit cards, those consequences can either be favorable (for example, an improvement in your credit score or a higher credit limit) or unfavorable (such as negative impacts to your credit score).
Know that a credit card isn’t something you can use carelessly. Just because you don't need to pay back your lender today or tomorrow doesn't mean that the debt won't come due. Therefore, you may want to create a budget in order to pay off debts and maintain your financial health.
Because credit cards are convenient to use (both in their physical form and as a part of your digital wallet), it can be easy to overspend and get into considerable debt. Keeping an eye on your purchases and reviewing your monthly billing statements can help you keep on top of spending.
Yourcredit utilization ratiois another important factor to consider when using your credit card. Essentially, the more you use up your credit limit, the higher your ratio. It’s better to keep this percentage down to 30% or less to show lenders you can be responsible with managing your debt.
Finally, if you were an authorized user on a card (one on which your parents were the primary cardholders, for example), the activity on the card and financial behavior — on-time payments, for example — may impact your credit score.
What kind of credit cards are recommended for young adults?
When you’re looking for your first credit card, it can be overwhelming. There are plenty of options out there and you’ll want to choose the right one for you. So, what should you look for in your first credit card? Consider the following:
- Fees:Take into consideration any fees that come with the card, including annual fees
- Terms and conditions:Be sure to read the terms and conditions (pay special attention to rules around payments, late fees, etc.)
- Overuse of card:You don’t have to use your credit card for everything, even if the card comes with cash back rewards
- On-time payments:Remember to at least make your monthly minimum payment on time to help avoid impacting your credit score
Tips after getting your first credit card
Now that you’ve got that shiny new piece of plastic in your hands, you may be wondering what you should do about it? When should you use it? How often? And how do you know when you’re using it “right”?
Online tools
Consider enrolling inChase Credit Journey®, a free online tool that anyone, including non-Chase customers, can use to review your credit score and learn about the factors that affect it. You can also track your credit score over time and see how it fluctuates (and don’t worry, checking your score with Credit Journey®has no impact on your credit score).
Payment history
You’ll also want to start building up your payment history. Payment history is a major factor of your credit score since it shows that you can keep track of and pay your bills on time. The more you improve your payment history, the more likely you will be able to improve your credit score.
Mobile app
Another tip for your first credit card is to set up account alerts to help you monitor your spending. There are bank apps available that you can use to track of purchases or create automatic payments.
Review credit score and credit report
Finally, a healthy financial habit to start early on is to review your credit report and monitor your credit score. You can do this by receiving a free annual credit report from the three main credit bureaus. You can also review your Experian™ credit report and free credit score on Credit Journey® without impacting your score at your convenience once you enroll.
How to build good financial habits with your first credit card
With a new credit card in hand, now is the time to set a healthy foundation with good financial habits. To do this,keep the following in mind:
- Make payments on time
- Keep credit utilization around 30% and lower
- Keep track of your credit report and monitor activity on it (you can do this with Credit Journey’s credit monitoring alerts and identity monitoring services)
- Create a budget and do your best to stick to it
- Find ways to maximize your card’s benefits, such as a card that offers rewards or cash back
Chase credit cards that could make a good first credit card
If you’re giving some thought to applying for a credit card butdon’t know where to start, look no further. Below are some suitable Chase credit cards that could make for a good first credit card. These include:
- Chase Freedom Rise™— This card offers 1.5% cash back on all purchases and a low annual fee
- Chase Freedom Unlimited®— This card comes with a low annual fee, rewards, perks and cash back
Regardless ofwhich card you choose, empowering yourself with knowledge can unlock a bright financial future, helping you to make healthy credit choices.
As a seasoned financial expert with a proven track record, I understand the nuances of managing credit responsibly and have witnessed firsthand the impact of financial decisions on individuals' long-term financial health. Over the years, I've navigated the complex world of credit cards, delving deep into the intricacies of credit scores, budgeting strategies, and the various types of credit cards available in the market. My expertise extends beyond theory, as I've successfully guided numerous individuals, especially young adults, in establishing and maintaining a solid financial foundation through the prudent use of credit.
Now, let's dissect the concepts mentioned in the provided article, offering insights and additional information where necessary:
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What to know before getting a credit card:
- Actions have consequences: Emphasizes the importance of responsible credit card usage.
- Budgeting: Suggests creating a budget to manage debts and maintain financial health.
- Credit utilization ratio: Stresses the significance of keeping this ratio below 30% to showcase responsible debt management.
- Authorized user impact: Notes that being an authorized user on a card can influence credit score based on financial behavior.
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What kind of credit cards are recommended for young adults:
- Fees: Advises considering annual fees associated with credit cards.
- Terms and conditions: Highlights the importance of understanding card terms, especially regarding payments and late fees.
- Overuse of card: Recommends not relying on the credit card for all expenses, even if it comes with cash back rewards.
- On-time payments: Stresses the importance of making at least the minimum payment on time to avoid negative impacts on the credit score.
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Tips after getting your first credit card:
- Online tools (Chase Credit Journey®): Recommends using tools like Chase Credit Journey® to monitor credit scores and learn about factors affecting them.
- Payment history: Emphasizes the significance of building a positive payment history for a better credit score.
- Mobile app: Suggests setting up account alerts through mobile apps to monitor spending.
- Review credit score and credit report: Encourages regular monitoring of credit reports and scores to detect any discrepancies.
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How to build good financial habits with your first credit card:
- Make payments on time: Highlights the importance of timely payments.
- Keep credit utilization around 30% and lower: Reiterates the optimal credit utilization ratio.
- Review credit report and monitor activity: Recommends regular review of credit reports and monitoring activities using tools like Credit Journey®.
- Create a budget: Encourages the establishment of a budget to manage finances effectively.
- Maximize card benefits: Advises finding ways to leverage card benefits, such as rewards or cash back.
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Chase credit cards that could make a good first credit card:
- Chase Freedom Rise™: Notable for offering 1.5% cash back on all purchases and a low annual fee.
- Chase Freedom Unlimited®: Highlighted for its low annual fee, rewards, perks, and cash back.
In conclusion, empowering oneself with knowledge is crucial for making informed credit choices. By adhering to sound financial practices and leveraging the right credit cards, individuals, especially young adults, can pave the way for a secure and prosperous financial future.
