Why Acting Your Age Applies To What’s In Your Wallet & How It Can Save You Big?
By Odysseas Papadimitriou, CEO of Card Hub, a leading credit card comparison website.
Your credit card isn’t like a hammer, a tuxedo, or that trusty old station wagon that gets passed through generations of family members. You can’t just get one and be set for the foreseeable future. Not only are credit card offers constantly changing, but your financial needs also evolve throughout the course of your lifetime. I mean, would you honestly expect the same credit card to provide maximum benefit for both a single young professional fresh off college graduation and a married mother of three, for example?
Of course not, and while it’s unfortunately impossible to provide specific card recommendations that will last you a lifetime, I can certainly offer some insights into the best types of cards for different life stages. Knowing exactly what you want from a credit card as you move through life will undoubtedly save you time, stress and money. But before we get too far ahead of ourselves, let’s start at the beginning: limited credit.
The Beginning of Your Credit Career
It is far too common for people 25 and over to wake up with limited or no credit. You see, much has been made in recent years of the supposed dangers of credit card use and how the personal finance reform law enacted in February 2010 precludes people under the age of 21 from accessing credit. However, that very law cured many of the ills that pervaded the credit card market prior to the Great Recession, such as hair-trigger re-pricing and absurd fee structures. It also merely requires that young people either have the income/assets needed to make minimum credit card payments or a co-signer in order to open their own credit card accounts.
All in all, credit cards are exceedingly worthwhile, considering that they have the lowest barrier to entry for enabling individuals who use them responsibly to add positive information to their major credit reports on a monthly basis. Keep in mind that not using your card can also be considered responsible use, as long as you remember to pay any membership fees associated with it.
Therefore, the best card for novices is a no annual fee credit card for people with no credit. You want to minimize the cost of credit building, after all, and not having fixed costs allows you to retain the option of not making purchases.
Marriage
A wedding can be a costly affair and if you’re going to foot the bill yourself, then a 0% credit card will come in handy. Depending on the state of the economy, you can usually expect to find credit cards offering 0% introductory APRs on purchases and/or balance transfers. The ability to pay down debts over time without having to worry about interest will save you a lot of green and worry during the honeymoon stage.
Speaking of honeymoons, credit cards are also great conduits to free goods and services. They often provide free flights, hotel stays or cash as initial bonuses in return for customers opening new accounts and spending a certain amount within the first few months.
Having a child
The birth of a child will drastically alter your priorities, with short-term concerns like paying for diapers and baby food joining long-term goals like affording for college. A cash back credit card offering attractive rewards on everyday expenses like gas and groceries would prove helpful in addressing the former and as far as the latter is concerned, a credit card that automatically sends rewards to a college savings plan would be great.
Retirement
The card you get here depends on whether you’re planning for retirement or are already retired. If you’re planning, you want a rewards card that will help you put away the most free money possible. Oftentimes, you’ll be able to find a credit card, such as the Fidelity Retirement Card, that automatically deposits the cash back you earn into an IRA or other retirement-oriented account. Such a card would be optimal, but if none is offered, you should simply opt for whichever cash back credit card offers the highest earning rates on your biggest expenses.
Now, if you’re already retired, you’ll likely want a rewards card that is conducive to doing all those things you’ve always wanted to do. If you wish to see the world, get a no foreign transaction fee travel rewards card. If you want exclusive access to concerts, sporting events, etc., a credit card tied to your favorite sports team or a charge card are great options as well.
Final Thoughts
No matter what type of credit card resides in your wallet, it’s important to always spend within your means and make on-time payments. If you can’t avoid overspending, simply stop using your card because even the best credit card is bad if abused. Finally, make sure to avoid submitting numerous credit card applications over a short period of time, as this could result in temporary credit score damage. If you aren’t approved after an application or two, just opt for the certainty of a secured card. As long as you have the requisite $200 for the deposit, you should have no problem getting the go ahead, which will get you started on your credit building/rebuilding journey.