Millennials are an extremely debt-averse demographic, so it’s not surprising that they’re also ambivalent toward credit cards. 63% of people aged 18-29 have no credit card whatsoever. And 23% have only one.
I’m of the opinion that it’s extremely wise to have one credit card. I myself fall into the one-card group; it’s a valuable tool in my financial toolbox.
A little plastic emergency fund
I’ve already written about how a balance-free credit card can make a very handy dedicated emergency fund. Think of it like 911—hope you never need to use it, but be thankful you always have the option to when you truly need immediate help.
Establishing credit history
My partner and I had only been together for about a month when we decided to move in together. It was one of those generally ill-advised moves that nevertheless felt natural and right for us. When an unrealistically perfect place appeared in our price range, we put in an application and spent the next week biting our nails. We were up against multiple other applicants in a cutthroat rental market.
The realtor finally called, with bad news. She said there was a problem with our application: my boyfriend had no credit history. None.
With prayerful hands and wobbly anime eyes, we begged the landlord to give us a shot anyway, and he did—but only on the condition that my twenty-five-year-old partner got his mommy and daddy to co-sign the lease. I didn’t mind, but my boyfriend was pretty mortified. We were still in the holding-in-our-farts phase of our relationship… precious little things.
He and I were both raised in fear of credit cards. This fear came from our parents, and also that one episode of Rocko’s Modern Life where Rocko abuses a Conglom-O credit card and Heffer ends up selling his organs to cover his ass. The difference was: when I demonstrated that I could use my debit card effectively as a teenager (this was in the era where automatic $35 overdraft charges were all the rage), my parents urged me to get a credit card anyway, purely for the purpose of building credit.
You need credit history of some kind to do a lot of important adult things, like get a cell phone, rent an apartment, buy a car, and take out loans. A good score can improve your insurance rates, and even boost your chances of being hired by companies that perform background checks. (Which is fucked up, but I digress.)
Riddle me this one
As a side note, while doing research for this article, I came across this splendid piece of non-advice from Christian dentist-cum-financial-educator and stock photo enthusiast Jason Cabler at “Celebrating Financial Freedom.”
“Do you believe that it’s absolutely necessary to have a credit score? Most people do, and they are wrong. If you’ve made the commitment to become debt free, or you already are debt free, saving up for a car is very simple. You simply drive your present car until its paid off, then…”
Wait—how did you get that first car? Edward Nigma, STOP. I am not Batman! I cannot solve this riddle, and I was not born already owning cars! This is another good example of bad financial advice from self-proclaimed experts trying to sell broken advice to already-broke people.
Strike while the iron is cheap
So my poor boyfriend now knows he needs a credit card—but it’s 2009, the economy is in the toilet, and suddenly every lender’s asshole has puckered up so tight you’d think someone had tried to shove a lemon in it.
He had to settle for a secured credit card, a type of card where your available credit line is determined by real cash you’ve already put down. And he had to pay an annual fee for its use. He was at the mercy of the global economy, and it was the best of his limited choices. I had a pre-recession card, with no fees and a relatively high spending limit for my barely-there income.
No one knows what the future will be in a global economy where the decisions of a few can wreak havoc in unpredictable ways. Pursue a line of credit now so you’re not trapped in a situation where you need it and can’t get it.
More on how that all works here:
- Dafuq Is Credit and How Do You Bend It to Your Will?
- The Best Way To Pay off Credit Card Debt: From the Snowball To the Avalanche
- How to Build Good Credit Without Going Into Debt
- How to Instantly Increase Your Credit Limit
- Let’s End This Damaging Misconception About Credit Cards
Training yourself to show self-discipline
I’m lucky. I was born with two fistfuls of self-discipline. Patience and the ability to delay gratification are the traits most strongly associated with lifetime financial achievement. Are you familiar with the Stanford Marshmallow Experiment? Check it out—it’s fascinating.
You might not have been born with that particular prefrontal cortex/ventral striatum configuration. But the human mind is amazing. Like any muscle in your body, you can train parts of your brain to become stronger. Giving yourself access to some temptation can be a great way to train yourself into greater financial self-discipline.
And if you find you’re failing too often, all you need is a good pair of scissors.
SUPER LATE BUT HERES SOME ADVICE:
Alternatively, if you have a loan it will permanently stay on your report. It’s considered a line of credit. You can obtain small personal loans from credit unions and some regular banks. The rates are lower than credit cards and you get the funds upfront. You can also get a ‘secure loan’ which works as a secure credit card does. The difference is that since it’s a loan, once you’ve paid it off and closed the loan, your score will not drop because that credit history is permanently on there.
I work at a credit union. We tend to try to steer clients with no or poor credit history towards those two options to help them build some sort of credit.
WE WELCOME THIS LATE YET EXCELLENT ADVICE.