Ah, the new Credit CARD Act — it’s there to keep you safe from sketchy lenders and credit pitfalls, but if you’re under 21, it will also make getting your first card trickier than ever. And credit cards aren’t just about trip reservations or ordering takeout; they’re one way to build good credit so you can land an apartment or new car down the line.
So, you’re under 21 and want a card to help establish your credit. What to do? One option is to have your parents co-sign for a card or put you onto an account in their name. If they aren’t game for that, a secured credit card is another option. Secured cards usually have higher interest rates and some annual fees, but they can be a good first step toward building your credit and eventually getting an unsecured card.
Here’s how they work: you deposit a set amount into an account, that amount acts as your credit limit, and you use the card just like any other card. Most secured cards have a limit in the range of $300 to $500 — not enough to break the bank, but enough to show lenders you can keep your balance low and pay bills on time.
The key to using a secured card to build credit is to pay off your balance every month. Shop around to make sure you’re getting a good interest rate, and read the fine print on fees so you don’t rack them up unknowingly. Also, make small purchases rather than spending to your limit. Stick to these tricks and you could be off to a credit-savvy start.
For more tips on building credit, whatsmyscore.org.
See the new Credit CARD Act of 2009 at
http://www.whitehouse.gov/blog/A-New-Era-for-Credit-Cards.
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- How your Credit Card can help your Money Management
- The Other Magic Number: Your Credit Utilization Rate
- The CARD Act and potenital new credit card fees
- Control Your Budget – With A Little Help From Your Credit Card
- Responsible Use of Rotating Credit
