Credit Cards - Your Money Mom

How to Credit Card Rewards: A Very Basic Guide for Beginners

May 22, 2019 by Nancy

THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE SEE MY DISCLOSURE FOR MORE INFO.

This is the third in a series about credit cards. For those new to credit cards or want to learn about getting your first one (or your first one for your teen), read this post. For those in credit card debt, please start with this post about paying off credit card debt.

Let’s say you follow the number one rule of credit cards: you pay them in full and on time every month. You might be a good candidate for optimizing your credit card use to take advantage of the perks and rewards offered.

First of all, I am in no way a travel rewards or travel hacking expert. There is a whole community of serious travel hackers, from travel bloggers like “Travel Rewards 101” “The Points Guy” and “Million Mile Secrets.” These websites and resources offer tons of information about all the ways that travel rewards can be accumulated, used, and optimized.

But frankly, it’s overwhelming. It was for me when I started on this journey. I still consider myself a relative novice. So I thought readers would find it helpful to have a basic primer on credit card rewards. I would have liked this when I was first learning about credit card rewards, so I created it!

My Credit Card Rewards Journey

First of all, for years and years I have loved my Discover card cash back bonuses. (this link is a referral for a $100 statement credit if you sign up).

The Discover I have offers a 1 percent cashback for all purchases, and every quarter, a 5% cash back bonuses for rotating categories. So, for instance, right now (from April through June) the Cashback bonus is for gas stations and Uber/Lyft. We are all using the Discover card to put gas in the car during this period.

I loved the Cashback bonuses because you can convert them into gift cards to dozens of restaurants, hotels, stores, & services. I usually redeem ours for Panera or other restaurant gift cards, and then we eat out “free.” Its just always been a nice little perk.

Several years ago, in a “finances” overview at our oldest’s college orientation, the mom next to me asked if she could pay for tuition on credit cards. (Turns out that wasn’t allowed at that college, though there is a way around that—for a future post). We started chatting and she mentioned that the reason she wanted to put tuition (not a small amount!) on credit cards was to get travel rewards.

As we walked out of the session, the woman told me how her husband was really into points. He had accumulated (literally) one million miles, which was going to allow their family to travel and stay in Hawaii for free.

At the same time, I heard about travel hacking on several podcasts, so I began doing a little research.

Total overwhelm quickly ensued!

First of all, there was too much information about all the different cards.

Second, many of the “travel rewards”gurus (usually single people) were using their points for things like super luxurious first-class tickets to exotic destinations.

I just wanted to find out how I, a normal mom who loves traveling with her family, could find a way to do it less expensively.

Maybe not Hawaii, but definitely Europe, and other destinations, were among my goals.

One card that came up again and again is the Chase Sapphire Preferred Card. (this link takes you to a page for the Chase Sapphire Preferred Card). Once you obtain the bonus “Ultimate Rewards” points, you have a lot of great options for free travel.

How does a travel rewards credit card work?

The basic process is this: You sign up for a new credit card. If you meet the “minimum spend” in the time specified by the card, you are rewarded with a huge bonus of points. You can then use these travel rewards points for flights, hotels, and other free travel.

Chase Ultimate Rewards points are considered highly valuable. That’s because you can convert them into points from so many different programs, including airlines and hotels.

How we have used credit card rewards:

*many, many restaurant gift cards ($45 in Cahsback bonus = $50 in gift cards). This is my fun “eating out at Panera” or other places, without having to record it in YNAB. (You Need a Budget app–the way we keep track of our monthly spending and on target).

*free flights (on Southwest Airlines, one of our favorites) for our family to travel to a summer reunion last year. I have also booked this year’s flights with points.

*free hotels for various trips (Marriott, Hilton Honors, and IHG, chiefly).

*the Southwest Airlines companion pass. This is a pass that allows one person to fly free whenever I fly, through the end of 2020.

We actually have many more miles and points just waiting to be used, on a number of credit cards. As many people put it, the points you accumulate do not grow in value. Therefore, it’s a good idea to use them as you accumulate them. But I’m a “saver.” Having those rewards on hand for any last-minute travel or needs makes me feel good.

Objections to seeking travel rewards:

**it will hurt my credit score.*

This is not necessarily true. There may be a temporary drop in your score when you apply, especially for a “hard inquiry.”

(A potential creditor, such as a credit card, bank, or mortgage company, requesting your credit information is considered a “hard inquiry” rather than a “soft inquiry). In general, however, that score but that will bounce right back after a few months.

Everyone’s credit is different but I have actually found my credit score improving. (I have a very long length of credit, so that may help as well.)

*I can’t meet the minimum spend.

The minimum spend on the cards can range from $500 to $5,000. That must be completed within the first three months of being approved for the card. Note that that the clock starts ticking right away, not just when you receive the card, so meeting that minimum spend ASAP is critical).

You may think that you don’t spend enough on credit cards to warrant that, and I understand. But you would be surprised at how much you can put on credit cards, from your cell phone bill to all of your groceries, your utility bills, tuition payments, and more.

For tuition payments, it’s usual for them to charge you a fee, say 2 or 3 percent of the total, to put it on a credit card. That’s not ideal, but if you only need a small charge to finish meeting the minimum spend, it could definitely be worth it.

For money you’re going to be spending anyway, such as utilities, cell phone, groceries, and gas, why not be rewarded?

If, despite all this, you don’t feel you could meet the minimum spend, or it would be “too close,” I would say that it’s probably best for you to wait to consider one of the travel rewards cards. Instead, consider getting the Discover Cashback card because there is no minimum spend to begin receiving the Cashback.

*I don’t want to pay the annual fee for the card.

Many of the travel rewards cards have an annual fee. Some, but not all, waive the fee during the first year, so you can see if the card is a good fit for you. I have kept my Chase Sapphire Preferred card, despite its $95 annual fee, because it offers other perks that I find useful, but others have downgraded their cards to a more basic one. (I would NOT recommend cancelling a credit card, because that can hurt your credit score).

*I might overspend.

If this is the case, you are definitely not a good candidate for credit card rewards. Spending money you weren’t otherwise going to spend, or money you don’t have (incurring credit card debt), completely negates any positive points or rewards you would receive. It’s good to know yourself, and if this is you, stay away. There are other ways to travel inexpensively.

Key Takeaways:

**NUMBER ONE RULE OF CREDIT CARD REWARDS: YOU MUST PAY YOUR BILL IN FULL AND ON TIME EVERY MONTH*

This is the only way that credit card rewards, whether cash back, travel rewards, make any sense.

*don’t rush into anything. Consider all your options.

*for starters, consider a Cashback type of reward card.

*for travel rewards, consider Chase Sapphire Preferred (Ultimate Rewards) card as a good first card.

*for hotels, consider the Marriott Bonvoy or Hilton Honors branded credit cards. The points bonuses are generous, and these cards offer other perks while staying in the hotels.

*keep it simple.

For travel rewards bonuses: start with one card and meet the minimum spend, then repeat once you have been successful. No need to get too creative or complicated about it. Also keep track of your credit cards.

*be scrupulous about following the rules.

related to cards and points accumulation and usage. You don’t want to lose out on the points bonus because you missed the deadline.

Resources:

Here are several of the websites that I have found helpful in learning about travel rewards:

Travel Miles 101 offers a free e-mail course that is pretty manageable in introducing the concepts. The course was put together by an entrepreneur (Brad Barrett, co-host of the super-popular ChooseFI podcast) and an MD, who both take advantage of rewards in different ways. It’s helpful to see both perspectives on it.

The Points Guy is a group of travel blogs and writers who offer sooo much information on credit card rewards and using points for travel. I have found them helpful when I was transferring Chase Ultimate Rewards Points to Southwest for free flights to our family to our family reunion trip. But it can be overwhelming at times.

Million Miles Secrets is another travel rewards site. Tons of information. Both of these are good for searching “how to” do something once you have accumulated points and want to redeem them in the best way possible.

Choose FI is the increasingly popular podcast about all things related to FIRE (financial independence, retire early) and living in a countercultural way so as to have freedom. Travel rewards is one of the “pillars” of FI (financial independence), and they have numerous articles and other resources related to it on the website. There are several podcast episodes related to just travel rewards. Well worth a listen.

Paying Off Credit Card Debt: Getting Your Act Together

May 15, 2019 by Nancy

This post is part of a series on credit cards. Read about credit card rewards here and the pros & cons of getting your teen a credit card here.

Dave Ramsey is (kinda) right

I’ve written before about how some of Dave Ramsey’s advice is wrong (for instance, here is where I write about getting your teen his or her first credit card) but he’s got something mostly right.

Credit card debt is bad.

Kudos to Dave Ramsey for educating many people about finances and help people get out of massive debt. And what he says about the perils of credit card debt is generally sensible. If you get into even a small amount of credit card debt, the negative power of compound interest can really wreak havoc on a person’s money life.

Is this post for you?

So, are you a good candidate for this?

You are if:

you want to learn about using credit cards responsibly.

you have one or more credit cards with a balance(s) that you don’t pay in full every month.

you want to figure out the best way to pay them off.

you want to use credit cards responsibly going forward.

Let me just start off by saying that this is a judgment free zone. If Dave Ramsey is the mean, Jillian Michaels of personal finance, I’m the Planet Fitness (I just discovered that The Judgment Free Zone® is a Planet Fitness trademark, so I really am the Planet Fitness of personal finance).

No lunks allowed, and that includes you. No feeling terrible terrible about what you’ve done in the past with money.

Remember, you’re doing well with your money, and you can do better. Reading this article is how you’e doing well, and getting ready to take action is how you’re doing better.

So, no to shame. But also no to magical thinking. This would be thinking along the lines of “If I don’t figure out how much I owe, or open my credit card statements, the debt doesn’t exist.” Or “I’m going to win the lottery, and therefore all of my money troubles will magically disappear.”

Credit card use is one of those. Responsible credit card use can build a good credit score, which can save a person thousands of dollars in interest and other fees, since those with the highest credit scores get the best rates for things like mortgages. Credit cards can also be convenient and helpful in tracking spending, and offer protections (and sometimes insurance) that debit cards and cash do not.

Step One: Get Your Numbers Straight

So, let’s get started. It’s time to gather all the information that you have on your credit cards.

It’s likely that you get and view your credit card bills online. (If not, please consider doing so–it’s such an easy way to keep track of and pay your bills). Gather the last statement(s) of each credit card.

Here is the relevant information that you need for each one:

full balance

APR (interest rate on card)

minimum monthly payment

In all of this a spreadsheet can be your friend. For clients, I put together a spreadsheet with this information. If you have a simple spreadsheet, you can see the payoff over time, and see how quickly you are paying off the credit cards.

Here is probably the most important part of this: once you are committed to pay off your credit card debt, you should resolve to use only one credit card for the time being, and that one you will pay off in full and on time every month.

That way, at the same time that you pay off the debt, you are practicing the quality that is most important in credit card use: paying your credit card bills in full and on time every month.

Once you can do that easily, and you have no credit card debt, you can take advantage of other benefits that credit cards can offer, such as cash back, free travel, and other perks. More on that in another post.

Step Two: Choose Your Poison (your Debt Payoff Method)

For the other credit cards, you should next figure out which one you want to pay off. Here are, briefly summarized, the four strategies that are good for this.

The “debt snowball method”

— this is the very helpful method used by Dave Ramsey.

He tells you to rank the debts in order of smallest to biggest balance, disregarding the interest rate on any of them.

Each month, pay the minimum balance on all the cards that are not the lowest balance, and throw all your extra money at that small debt. Once it’s paid off, you can put all of that money towards the next biggest debt, and minimum payments on that one.

Repeat until all of your debts are paid off. The benefit of this method is you have quick “wins” and this often leads to success and momentum.

The “debt avalanche” method

The “debt avalance” method was popularized by another personal finance guru, Suze Orman. She recommends listing your debts, but in the order of highest interest rate to lowest interest rate. Pay off the highest interest rate debt first, and then repeat with each debt (highest to lowest interest rate) until it is all paid off.

The upside of this method is that it mathematically makes more sense than the “debt snowball” method. The downside if you have a big debt with a high interest rate, it may take so long to pay off that you lose momentum.

Credit counseling/credit consolidation

The third method of paying off debt is to consolidate your credit card debt into one personal loan.

The benefit of this is that you would likely have a lower interest rate and a smaller monthly payment to pay off the loans. However, there are serious disadvantages of this, especially if you have not resolved to not get into credit card debt again.

I do not recommend this as a strategy–I think there are better ways to tackle credit card debt than this.

“Your” debt payoff strategy

The final method is “your” debt payoff strategy. You will take the best features of each of these methods of debt payoff and tailor it to your situation and what works best for you. This will help you have the greatest shot at success. You can combine these methods to craft a plan that will be successful for you.

This is one of the ways that I help my clients, and the accountability that I provide helps them keep at it, but you can work through this yourself, and indeed, you are always the person who is responsible for your financial decisions.

For this method, you’ll first rank the debts as most important for you to pay off.

Perhaps there is one debt that has a lot of bad associations for you—it’s a credit card that you used a lot when you were dating someone who you no longer date, or your spending on this card was associated with something negative for you. Unless it’s significantly higher than the other balances, I want you to consider paying off that one first.

Then rank the rest of your credit card debts that way. If you really don’t have any strong negative emotions associated with the rest (or even any of yours), you rank them in the way that seems to make the most sense for you. For many people, it’s the Dave Ramsey debt snowball, so it would be smallest to largest.

Now, we have a test period. For 3-5 months, set aside an amount to go towards credit card debt payoff, and divide it up the following way:

*assign a little more (say, $5-10) more than the minimum payment on all the credit card debts.

*Next, assign the remaining amount of the debt payoff money that you can towards the most important to pay off for you. Soon, you’ll have that one paid off, and you can move on to the others.

Step Three: Once You’re Successfully Underway, Consider a Balance Transfer Credit Card

Now, you can try some of the advanced ways of accelerating your debt pay off. This involves various strategies to reduce or eliminate the interest on this debt.

Ask to have your interest rate reduced

First, call each of the credit card companies and ask if you can have your interest rate reduced. This is very common, and while you can feel nervous, it’s a great step that can help you immensely.

I walk my clients through this, but here are some brief tips on how to do this:

*be much nicer than you feel (smiling helps),

*discuss how you’ve been a good customer, and

*be persistent.

Just know that it’s not unheard of to ask for this, and you will often, if not almost always, get a reduction in rate. If not, you can always try again later, even right after you first try.

Hopefully, you’ve had your interest rate reduced, so that you will be able to pay off the debts that much more quickly.

Explore balance transfer credit cards for 0 interest payback time.

Second, if you have an amount that you can easily pay off in less than a year, and you’ve demonstrated that you can comfortably pay that amount each month, consider a balance transfer credit card.

These are credit cards that offer a 0 percent interest rate for a certain amount of time–between 12 and 18 months. If you can pay off the debt in that time, you can put all of the money towards the debt, instead of growing interest payments.

The one fee charged by many of these credit cards is a fee to transfer over the balance–usually between 3 to 5 percent of the total. So, for instance, on $1,000 of credit card debt, the fee would be $50 if the transfer fee were 5 percent. Not bad for the ability to pay it off much sooner.

But some credit cards (Chase Slate is one, for instance) charge nothing at all to transfer money (in the first few weeks of opening the card), and it’s worth seeking those cards out.

I don’t recommend getting a balance transfer card until you can pay off the loan WELL AHEAD of the grace period time. So, if it’s a 15-month grace period, you should be able to pay off within 12 months. And if it’s an 18-month grace period, you should be able to pay it off easily within 14-15 months.

This provides you with some margin, or wiggle room, for potential issues or expenses that might creep up.

Now, pay off those cards in your time period, as quickly as possible (while still paying extra on your other credit card debts).

Now, repeat this for each of the remaining credit card debts.

Congratulations, you’re out of credit card debt.

Objections to Opening a New Credit Card

There are a number of objections to opening a new credit card, as described above, to pay off credit card debt. Let’s consider those.

*opening new credit cards will hurt my credit score.

Not necessarily. It might have a quick hit on your credit score, but over time it will not hurt, and can even improve your credit score.

And if you are concerned about taking out a mortgage or other loan in the near future (what your credit score can affect), it’s probably best to pay off this debt first. That margin is so important. By the time you are taking out that mortgage, any ding on your credit card will be long in the past.

*I might run up the spending on this card, as I have done on others.

If this is the case, this objection is valid. If this is true for you, you DEFINITELY DO NOT WANT TO OPEN A NEW CREDIT CARD.

You should have a track record of whittling down your credit card debt before you consider this strategy of debt pay-off. Be clear about that.

*credit cards are evil.

If you feel this way about credit cards, akin to Dave Ramsey, then maybe this approach is not for you. That’s okay!

There are innumerable ways to tackle credit card debt. I hope you’ve found some of my ideas helpful, or something to consider as you work out what makes the most sense for you related to credit card debt.

Key Takeaways:

*No shame, and no magical thinking. Get your numbers straight to know what you’re up against, and know you can tackle and conquer this.

*get your numbers straight so you know exactly what you’re up against. You can tackle and conquer credit card debt, but knowing your situation in valuable in crafting your best payoff strategy.

*resolve to use only one credit card until this process is completed, and pay that off in full every month. Everything else can go to pay off the credit cards.

*choose your debt pay-off strategy. My suggestion: a combination of what works best for you.

*consider a balance-transfer credit card once you are well underway in paying off credit card debt to speed up the process.

I hope you found this guide helpful in considering some of your options when it comes to credit card debt and getting it behind you. Credit cards, when used responsibly, can have many benefits.

Next, I plan to cover some of those benefits of using credit cards well. Stay tuned!

Remember, you’re doing well with your money, and you can do better.

(This post is not sponsored by any credit card company, but I do talk about my positive experience with Discover Card, especially as a first credit card. If you use the links in this post to sign up for a Discover card (like this one, we will each get a $50 credit). See my complete disclaimer policy here.)

(you can watch the video version of this post here.)

THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE SEE MY DISCLOSURE FOR MORE INFO.

Your Teen’s First Credit Card

May 13, 2019 by Nancy

This post is part of a series on credit cards. To read more about paying off credit card debt, go here. For more on credit card rewards, go here.

Dave Ramsey is wrong (about this)

When is it time for your teen to get his or her first credit card?

If you’re talking to Dave Ramsey, he would say: never.

Dave Ramsey has educated many people about finances and help people get out of massive debt. But some of his advice, especially once people understand money, is misguided.

Credit card use is one of those.

Responsible credit card use can build a good credit score, which can save a person thousands of dollars in interest & other fees. That’s because those with the highest credit scores get the best rates for things like mortgages, car loans, and other credit.

Credit cards can also be convenient and helpful in tracking your spending. They also offer protections (and sometimes insurance) that debit cards and cash don’t.

Finally, there are a lot of rewards to claim and leverage for free travel, cash, and other perks. But that’s only true if you easily pay off your credit card bills each month.

But …

Many people may be skeptical of getting or helping a teen get a credit card. That’s because most parents have made mistakes in the past when it’s come to credit card use and debt.

Many parents today came of age at a time when credit card companies handed out free t-shirts or pizza to students willing to sign up, and those college kids racked up either small or giant amounts of debt, without much, if any, income to pay it off. (This wasn’t me, but it could have been. I graduated college a few years before all the free t-shirts/pizza offers became common).

Giving a credit card to someone whose frontal lobe is not fully developed seems foolhardy at best.

Hear me out.

When a teen lives at home with parents is often the best time for them to practice using credit cards, paying them off in full every month, and tracking their spending. The right mindset when it comes to credit cards (and just money in general) is a gift to your children.

But let’s assume you’re a parent. Maybe you’ve made some financial mistakes—as we all have—but you want to help your teen have a better handle on finances from a young age.

One of the best ways is for you to help your teen get a credit card.

When is your teen ready?

But when is the right time?

Your teen is ready for a credit card if he or she:

*is generally responsible.

*makes money from a job.

*understands how credit cards work.

*resolves to pay the credit card in full and on time each month.

In our family, that is usually right around the time a teen starts driving. At that point Mom & Dad want them to carry a credit card (for us, Discover is our first credit card–see below for more details on how we did this) to get gas in the car that they are driving.

Once they are driving, they can also make random Aldi runs for me, and pay with the credit card. There are a lot of downsides to having a teen driver in the house (hello auto insurance). I take my upsides when I can get them.

Pros and Cons

Why should your teen get a credit card? A credit card can help a teen:

*develop the skill of navigating online bill-paying and other credit card basics.

*practice responsibility, consistency, and other important money values.

*help them track spending and categories easily,

*begin to develop a good credit score.

Building a good credit score is easily the most important reason for a teen to have a credit card.

“Length of credit” is an important element of a person’s credit score, and having a card from an early age is the way to do that.

For instance, my length of credit is well over 30 years, starting from the first Discover card I obtained right after college. My oldest daughter has a perfect track record in paying her credit card bill on time, but her credit score is about 100 points lower than mine. Why? Because my length of credit is longer.

In fact, in the distant past, I definitely forgot to pay my credit card bill occasionally, racking up late fees and interest. But my credit card money mistakes were so many years ago. Therefore, none of that shows on my credit score, and the length of time I’ve been paying bills (my “length of credit”) affects my credit score positively.

What are the cons of a teen (or anyone) having a credit card?

*it’s easier to spend more on credit cards than when using cash. This has been proven in study after study, but there are ways to help avoid this.

*it’s possible to overspend beyond your needs. That’s because you don’t actually need to have the money “on hand” or in your bank account to buy things with a credit card.

*if you do carry a balance, compound interest can create an either really bad, or potentially catastrophic, financial hole for a person to get out of.

You can be the “training wheels” for your teen to learn some of these basic skills.

How we did it

Let me explain how we did this in our family.

(I’m not sharing this because we are perfect in any way with our finances, or with raising our children. But, many people have found our approach helpful, and you may, too).

First, when a teen at our house begins to drive, they become an authorized user on our “family” credit card. This is a Discover card we opened specifically for the kids in our family, I asked Discover to give it a very low spending (credit) limit just out of an abundance of caution.

I chose Discover because it was my first credit card back in the last century. I’ve always been happy with their customer service; some of their alert features are very helpful for the purpose of monitoring credit card use; I love the Cash Back program (that doubles its payout in the first year, a definite advantage). I’m not sponsored in any way by Discover card, but I am a fan.

So, teen one becomes an authorized user on the “Family Discover.” I am the “owner” of the account and have the only access.

I set up alerts so that I get a text message whenever a purchase is made on the card, when it nears its spending limit, when the bill is due, and if anything changes about the account in any way. This is what makes Discover very helpful, as their text alerts are very specific. Some other credit card alerts only share “A purchase was made on your card.” Discover shares the amount, the purchase location, pretty much right when the purchase is made.

At first, I show the teen how I pay the bill every month.

Shortly thereafter, the teen & I both have the login information, so that the teen can pay the bill. This allows the teen to navigate bill paying, and learn about online bill pay and other features.

If the teen makes any purchases for me (like the before mentioned Aldi), I Venmo (or transfer) the money over.

At this point the teen is responsible for paying the bill in full. And the alerts still come to me, so I can see that the bill is paid on time. I can also see any charges or changes that are made to the account.

After a year or more of this, Mom & Dad have a discussion with the teen about getting a credit card solo. If the student is over 18, they can get the credit card without permission. But we find it helpful to have the discussion again about the benefits and potential pitfalls of credit cards.

Is my teen ready?

If you think you are ready to get your teen a credit card: first, that is a question only you and your family can answer.

Let me start by saying, don’t rush into anything.

Perhaps read this article together or others about credit cards, and the pros and cons of using them. If you do decide to go forward, here are some basics:

*apply for the card that is best for your situation (ignore card offers that come in the US mail or e-mail. Just to count I’ve started saving unsolicited mail we receive from credit card companies, and it can be dozens in a month.)

*seek out no annual fee, modest cash back/rewards profile.

*know your credit limit (and how it will be raised), but that it is NOT meaningful.

*resolve to spend only what you are willing to pay off in full and on time each month.

*set goals for low spending.

Challenge your teen to budget their own amount for discretionary spending, like eating out with friends, or shopping at Ulta. (Not that we have any experience with teens shopping at Ulta at our house, she said ironically).

*know the APR (annual percentage rate—interest).

This is helpful so that a person knows how much it would cost to carry debt on the card. In fact, many credit card bills list the “minimum payment due.” They also explain how long it would take to pay it off at the rate of the minimum payment. It can be pretty shocking.

*audit spending regularly to check for “overspend” or mindless spending.

Encourage your teen to go over his or her credit card statement, ideally every month. That is so you can both check charges, see if perhaps the teen overspent any areas because it was easy with a credit card. We’ve all done a $100 Target run that started with just needing toilet paper. But being aware that this is a risk and seeing how you have done it, is useful.

*be strategic from the beginning on cash back/rewards.

Key takeaways

So, to review some of the big takeaways from this on credit cards, both for you and for your teen:

having a credit card while still living at home with you can be a great form of “training wheels” for financial matters. This is especially helpful in paying bills and understanding how credit cards work.

the Discover card is a great first card for a young person to have, because of its CashBack program. (The Cashback is doubled the first year you hold the card). But there are plenty of others that would work well. Consider credit cards that you, as a parent, are comfortable/familiar with.

credit card spending limits are meaningless. Both you and your teen should understand that just because there is a credit limit of $500 or $1,000, that should never be spent unless the money is available to pay the bill.

the number one rule of credit card use is to pay your bill in full and on time each and every month.

Starting teens off with that mindset is a gift to them.

There are so many people, people who have had times in their lives that they had credit card debt or didn’t pay their bill in full each month. But I predict that every one of them would say that they wish they had started off paying their bills in full and on time every month.

I hope that you found this guide useful and helpful in considering some of the pros and cons of a person’s first credit card. Responsible credit card use is a skill that can be learned. When learned properly, the use of credit cards can be convenient, rewarding, and useful.

—-

(This post is not sponsored by any credit card company, but I do talk about my positive experience with Discover Card. If you use the links in this post to sign up for a Discover card (like this one, we will each get a $100 credit). See my complete disclaimer policy here.)

You can visit the YouTube video version of this post here.

THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE SEE MY DISCLOSURE FOR MORE INFO.