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How to Find a Credit Card

“Every self help book I haven’t read said I shouldn’t get a credit card”

– Kraken’s Brother

Growing up my mother always shielded me from enticing offers from credit card lenders. She would hand them to me, I would ask what to do with it and she would say “Throw it away Kraken, it’s junk.” Rarely, did we talk about why it was junk and what makes a quality credit card. My mother is a financially intelligent woman, she’s a CPA, she’s frugal, and I never wanted for anything as a kid[1]. Even with a financially intelligent parent I never learned the basics of credit cards[2] so getting one was quite scary for me. After getting a credit card I thought “this isn’t as hard as I thought it would be, wish I had gotten one sooner.”  By writing this article I hope I can help you find a card you want and then you will think the same.

Rule 1 – Know Yourself

If you are still dependent on your parents, significant other, friends, or magic eight ball to help you make financial decisions then you should not get a credit card. If you have ever buried yourself in a pile of credit card debt then you know far better than me that you shouldn’t get one. If you have even the slightest notion that you may not be able to handle the responsibility of spending money you don’t have then don’t even open this box with Pandora’s name on it. You should make a budget and know how much you spend, you should make sure that you have a comfortable amount of rainy day funds, and you should be able to support yourself without anyone’s help. Once you have reached that level of financial security then you can confidently march towards this battle of having a credit card.

Rule 2 – Know the Goal

As with all financial decisions, and life decisions in general, determine why. If the answer to your why is “I don’t have the money to buy something I want right now at the mall.” DON’T get a credit card. Go read some literature on the subject and come back with a better reason.

“I want to build credit” and “I want to get rewards for spending money I was going to spend anyway” are better reasons. Do some research to figure out if credit cards are really the best ways to achieve these goals. The best way to build credit might be to work with your bank and get a small loan from them and slowly pay it back. An optimal solution to get rewarded for your money could be investing it instead of spending it. I don’t know your situation but you do! Hell, you’re arguably the expert of your situation. Do some investigation and figure out if a credit card is the best option for you.

My goal for credit cards is to be rewarded for using money that I was already going to spend. I keep a tight budget and I know where my money is going so I know how much I can afford to spend using my card. My rules to facilitate my why are: Only use it on things I have to buy i.e. bills, grocery, or gas. Don’t pay annual fees because I would never pay fees to use cash. Pay the bill in full at the end of the month, this rule goes hand in hand with using my credit card as cash, if I don’t have the money to afford something with cash then I don’t buy it same goes with my credit card. My final rule is: Don’t use my cash back on impulse purchases, use it on stuff I need to spend money on like bills, groceries, or gas, or I invest the cash back like I would with my typical paycheck.

Rule 3 – Know the Game

By getting a credit card you are entering into a contract between you and the credit card company. Do you know what this means for your specific situation? Does it give them the ability to garnish your wages if you don’t pay? How does paying them or not effect your credit score? What happens if you apply for multiple credit cards in one month/year? What rewards will you get if you use the card? How are you planning to use those rewards?

These are all things that are specific to you and your life and you should know what you’re getting into. My solution to this is to play by the rules and avoid doing anything “weird” like applying for a bunch of cards at once and not paying on time. If you’re not sure which card is right for you seek the advice of someone who you respect financially[3]. I know my mom uses a credit card and I asked her about it, I also looked at MMM’s site and read through his list of credit cards because I respect his financial opinion. Before I did any of this I already knew myself and knew my goal so I was able to determine which cards would work for me. If I had skipped those first two steps I would be overwhelmed by the massive list of credit cards in existence, I could have made the wrong choice or no choice at all and would not be getting rewarded for spending money I was going to spend anyway.

Hopefully these rules help you navigate the churning waters of credit card offers. If you have a card what is your why for getting the card? What are your rules for using the card? How do you use the card that benefits you the best? Let me know in the comment section below!

Afterwards

[1] For better or worse, some would argue wanting for somethings improves one’s character.

[2] Of course school didn’t teach me because they assumed that I was learning about finances at home, home didn’t teach me because it wasn’t something we talked about. This is something that I think is fairly common and should be remedied in on way or another. I guess one solution is financial blogs.

[3] This has the added effect of helping you know yourself. If the person you ask says “you should in no way get a credit card because x, y, & z reasons” you should consider where they are coming from. I find that friends and family have just as good if not a better understanding of myself.

Photo Credit: Ben Schaffhausen

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