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December 20, 2024
Turning 18 is a major milestone. With official adulthood comes the right to vote, responsibility for jury duty, and, perhaps most importantly of all, the capacity to enter into contracts. With that legal capacity comes a world of financial institutions looking to gain your business and offer checking accounts, brokerage accounts, and credit cards. Credit cards are exciting ways to obtain rewards from purchases one will make anyway, but they can also enable spending beyond one’s means.
First, one must decide, amongst a deep sea of options, which credit card is best for them. Too often, folks obtain shiny metal cards like the American Express Platinum card not because they match the needs of their users but because they look nice or carry with them status. For instance, in the case of the American Express Platinum card, that appealing design comes with a $695 annual fee and a set of benefits mostly geared only towards heavy travelers. Since there are plenty of cards with no annual fee, those should be seriously considered first before justifying cards with one like the AMEX Platinum card.
Some popular picks at the moment include cards like the Wells Fargo Active Cash card, which offers unlimited 2% cashback on all purchases with no annual fee. Other no-annual-fee cards like Bank of America’s Customized Cash Rewards card offer heightened rewards for one specific category; with this card, it is 3% cash back in a category of your choosing and a lower rewards rate for all other purchases, 1%.
Regardless of the specific card, though, a new adult can easily obtain a couple thousand dollar credit limit with the promise of a teaser 0% APR, but then what? After that teaser APR expires, if a balance remains on the card, young borrowers are on the hook for well over 20% APR, a terrible financial arrangement for the borrower but a lucrative one for the lender. Of course, if a credit card user is responsible and decides to pay off their purchases in full every month, then this is not a problem. Unfortunately, as too many Americans know, not everyone finds that to be so easy.
The ability to handle credit cards responsibly and make payments on time does more than just avoid additional fees for the borrower. Building a credit history will enable an individual to achieve other major life milestones like buying a home, which makes it difficult to argue one should avoid credit cards altogether despite their ability to be misused. In the end, it is up to each credit card user how they want to use that piece of plastic, and consequently, they will be deserving of the credit (no pun intended) or blame for the consequences.
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