Why I Have Steered Clear Of Credit Cards, Until Now

This millennial wants plastic with the right mix of rewards, security, and budgeting tools.

 
 

As a kid, my parents taught me a fundamental lesson: Don’t spend money you don’t have. Because of that, I have always steered clear of credit cards.

But I plan to attend graduate school, and I will need to take out student loans. Eventually, I’ll want to buy my first house, and that will require a mortgage loan. For these, I will be turning to my primary financial institution. And to qualify, I will need a good credit history.

That's why this summer, I opened my own credit card.

I started online by comparing different financial institutions and reward programs, looking for the best benefits for me. I consulted with my parents, who suggested I speak with our family financial advisor to find a card that would fit my needs now as well as five years down the line. I chose a travel rewards card. The application process was short and required only a few forms.

I go to school in Washington, DC, but Seattle is home. A round trip flight ranges from $600 to $1,200, so earning miles on my everyday purchases benefits me. Approximately a week after applying, I found out I qualified for the travel rewards card. A few weeks after that, I received my card in the mail.

I activated my credit card at the end of May but didn't make my first purchase until the beginning of August. Why did I wait more than two months? Because I was afraid I would start to use my card beyond my means.

I was approved for a much higher limit than I had expected. The maximum limit was substantially higher than my average monthly income from my part-time internship. And even though I've known about the importance of fiscal responsibility from an early age, I know numerous horror stories of people not being able to pay off their credit cards and spiraling into debt.

When I went to college, my parents gave me a family credit card in my own name for emergencies. I may have used it for other, more fun, reasons, as well. But I was not the one paying the bill. Now that I am, I’m more mindful about the charges I put on it.

I’m budgeting between fun and necessities, and the latter is my main priority. I also try to be diligent about paying off my credit card balance. Currently, I pay as I go through my credit card’s mobile app by transferring money from my checking account after each purchase. I do this for two reasons:

  1. I do not have to wait and potentially forget to pay it off each month.
  2. I want to remain conscious about how much I spend by seeing money go straight from my checking account and reducing my balance.

My biggest fear is spending more than I earn. When I use my debit card, I know I can only spend what I currently have in my account. But a credit card gives me the ability to go far beyond my monthly income. 

 

 

Several weeks ago, a few Callahan employees debated the merits of Debitize, a program that essentially converts a credit card into a debit card. It has the “credit card perks without the risks,” according to its website. As a user makes purchases on their credit card, money sweeps either weekly or monthly from a checking account and automatically pays off credit card purchases.

To me, Debitize is potentially a strong tool for young adults new to managing their own credit cards, like myself. Instead of transferring money back and forth on my own, Debitize would automatically do it for me. Having the ability to receive credit card benefits while still budgeting the money I currently have enables me to be smart regarding my personal finances. That said, I am hesitant.

Fintech is still an emerging industry — as much as it is changing the way people think about money and their personal finances. Millennials are known for wanting things done better, faster, and with the touch of a button. But as curious as I am about emerging fintech products, I am highly aware of the risks and potential security concerns.

I will be ready to test out different products once the framework exists to more heavily regulate fintech. For now, I feel comfortable using my primary financial institution’s mobile banking app. I do use Venmo, to which I link my checking account. But it took me a long time to adopt, and the only reason I did was for the social benefit of making it easier to pay back shared purchases when out with friends.

Aside from those, I feel better managing my money in person with a trusted financial advisor.

I’m not saying we should move towards stuffing money under our mattresses, because as technology evolves it does make our lives easier — we should just make sure it meets our requirements for safety and security.

 

Oct. 17, 2017


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