Money is a feminist issue — and yet, women are still reluctant to talk about it. According to a recent Bustle survey of more than 1,000 millennial women, more than 50 percent of people said they never discuss personal finances with friends, even though 28 percent reported feeling stressed out about money every single day. That’s why Bustle launched Grown-A$$ Finances, a series that gets real about what millennial women are doing with their money, and why — because managing your money should feel empowering, not intimidating. Today's topic: what you need to know about credit cards.
Two months before I set out on my first solo trip, my mentors at my then-job sat me down for an important heart-to-heart. Or rather, that time when I confessed that I didn’t technically have a credit card because I was 'afraid of them' — they gasped and said, ‘We can’t let you go to Puerto Rico by yourself without a credit card. What if you have an emergency? We’re applying now.” And that we did — after doing a thorough poll via Facebook of the best credit cards and investigative journalism work via Google for the best rate.
When you’re joining the grand world of charging money that’s not yours, it can be more than just a little intimidating. How do you pick a card that gives you rewards? What are rewards? How much of a credit line do I actually need? What if I can’t control my spending? Should I put it in the freezer? Do people really do that?
Here’s what financial experts want you to know about credit cards and the right way to use them:
To prevent yourself from stopping by one sample sale after another or ordering endless bottles of wine at dinner that are overpriced to begin with, Erin Lowry, Millennial personal finance expert, and author of Broke Millennial: Stop Scraping by and Get Your Financial Life Together tells Bustle to never, ever leave a balance on your credit card. “There's no benefit to carrying a balance on your credit card," she says. "You don't need to be carrying a balance to have a strong credit score (even though that rumor persists). All it does is put and keep you in debt. Each time you get the bill, pay off the entire thing on time and in full.”
...so you can’t pay off your credit card in full this month. Hey, holidays and birthdays and unexpected life adventures and disasters happen. If you find yourself in this sticky situation, Lowry says it’s better to pay even a dollar over the minimum payment, but never just the bare basics. “Even if you've gotten yourself into a debt cycle that you're trying to dig out of, always pay more than the minimum due on a credit card," she says. "Even just $10 a billing period can help shave time off your repayment period."
OK, so this time, all you can afford is the minimum payment and even that is asking a lot. Though not advisable if you’re trying to build credit and don’t want to into a habit of hanging onto debt, as long as you make your payment, that matters more. “No matter what, always make a payment on time — even if it’s just the minimum," Kerri Moriarty, Head of Company Development at Cinch Financial tells Bustle. "It’s a huge mistake to miss a payment, because it’s the most important factor in consideration of your credit score. One negative mark on your payment history can impact your score for over seven years! It’s just not worth it. Keep track of your payments and do your absolute best to never, ever miss one.”
Instead of opening up your wallet and pulling out whatever credit card feels the best at the given moment, Moriarty says to be highly strategic about which plastic you use, depending on the situation. While some cards have high interest rates, other reap really beneficial rewards, and you want to capitalize on your opportunities as much as you can.
“The average person has somewhere between 5-6 credit cards in their wallet and each card is different, whether it’s a rewards card, or only for use at a specific retailer, high interest, zero interest, or low interest, etc," she says. "It’s a mistake to simply blindly reach into your wallet for a card to swipe instead of using different cards at different times. For example, if you have a card that earns two percent back on gas — you want to be sure to pull that one out at the pump, rather than one that earns a flat one percent on all purchases. It’s small dollars, but it’s literally double the rewards.”
Or if you can’t pay off your credit card at the end of the month because of a large purchase, you need to figure out which card is the best for holding a balance. “If you’re planning a purchase that will you won’t pay off right away – or if you’re already carrying a balance you know you need to add to, you want to be strategic about which card you put it on. If you’re taking on card debt, take the time to review the interest rates on each of your cards and make sure you’re putting the purchase on the lowest one! There is a huge difference in debt payoff between a 13.99 percent APR and 23.99 percent,” Moriarty says.
So I sort of lied — my first credit card was at 19, but my parents were in control of it, made the payments and told me what to spend. It was a gift to me while I was interning in NYC in college, and they paid it off in full for me as a graduation gift. Even though I haven’t used that account in almost ten years, it’s still open — and Moriarty says that’s a good thing.
“The longer your credit history the better, but many people make the mistake of canceling their oldest cards because they no longer use them or have better ones in their wallet," she says. "This is a mistake because your credit score considers the average life of each of your credit cards. If you are 35 and got your first credit card at 18 and another at 28 the credit card company can see you’ve had access to credit for 17 years. If you cancel the card you got at 18 because you don’t use it — when being evaluated for future credit, it looks like you’ve only had access to credit for the last seven years. You want to demonstrate that you’ve been responsible with your credit for as long as possible. Even if you don’t use the card, just keep the line open!”
It’s tempting at checkout when you could technically save 20 percent off those cute tops and expensive makeup you just found and have-to-have, but savings expert at CouponSherpa.com, Kendal Perez tells Bustle that store credit cards are never a good idea. “These store cards are almost always a bad idea,” she says. “They feature low credit limits, high APRs and tempt users to spend more to earn rewards. In some cases, opening a store credit card can be a savvy move, but that’s only if users can avoid impulse purchases and pay off balances in full each month.”
Just like you’d read reviews for a hotel before staying there or check the references for an assistant you’re hiring, make sure to do your homework on a credit card you’re considering getting. And not just the fast facts they use for marketing — but the fine print, too. CEO and co-founder of RewardExpert Roman Shteyn says, “If you’re in the market for a new credit card, be sure you know what you’re getting yourself into before you sign up. You may be signing up for a card that has an incredible 0 percent APR rate only to find out that the fine print states that offer lasts only for the first six months.”
For a long time, the way I balanced my finances was paying my bill in full at the end of the month and not even checking my transactions. But after some unwanted fraud — in the form of a random person buying a $200 drone with my credit card — I started taking a closer look. What you’ll start to see are odd fees or random purchases that might not be yours, or restaurants that unknowingly charged you twice for cocktails. That’s why Shteyn says to always page through your statements.
“Credit cards offer a layer of security to their members, but you could forfeit that safety net if you don’t take the time to review your monthly statements," he says. "If there are any unapproved charges or prices, you only typically have 60 days to dispute them. If you find any erroneous transactions, do not pay the statement until your dispute is settled.”
If the whole reason you signed up for a travel rewards card is to um, travel, but you’re still booking your flights via air travel search engines — consider giving your rewards mall a visit every now and then. Though not always the best deals, you earn the dollars by spending other dollars, so in a way, it’s a ‘thank you’ for spending with them. “So much of shopping happens online already, why not give it an extra click to shop through your credit cards rewards mall and earn points in the process?,” Shteyn says. “Card members are prone to forgetting that they can earn anywhere from 2x-15x points per dollar when they shop at their favorite online retailers if they just log into their credit card rewards mall first.
The long and the short of it is that while credit cards require responsibility, when exercised smartly and with your adult-sized pants on, they can not only help you build credit for future big investments you want to make (like buying a home), but also help you get travel points and ‘free-ish’ money along the way.
Check out the “Grown-A$$ Finances” stream in the Bustle App for more tips and tricks on how to save and spend your money.