When getting your first credit card is tough

Over the weekend, I read this article on Slate about the author’s struggles with getting his first credit card.  He had a job, no mortgage, and no debt.  But he also had no credit history, which meant that no credit card was willing to take a risk on him.

Ultimately, he had to get a secured credit card, which will help him build credit.

My brother went through the same thing after he graduated from college.  Why?  He never had a credit card in college.  He had a debit card, but that was it.  Conversely, I always had a credit card in college.  I didn’t have a debit card (I still rarely use one – only when I need to get cash), which meant that most of my purchases went onto my credit card.  I was one of those smart college kids who always paid off my credit card and didn’t use my new found credit limit to go out and buy a fancy new tv or go on a crazy spring break trip.  That meant that when I graduated from college, I had good credit and was able to get a reasonable credit limit.

So what’s the best thing to do here?  Should we encourage college kids to get credit cards?  After all, wisely using a credit card and building up credit is a great thing.  But then there are the stories of the students who run up huge bills and can barely pay the minimum balances.  I have plenty of friends, smart, intelligent friends, who ended up in that boat.

My first credit card had an extremely low limit.  Somewhere around $250.  That would keep a student out of too much trouble, but there are plenty of worthwhile purchases that cost more than $250.  What about plane tickets, for example?  And of course, credit cards are happy to increase those limits (though maybe not as much as they used to be).

Plus, is there a lesson to be learned about responsible credit card use?  Who’s to say that making a college student wait til he’s out of school and has a real job is going to mean he will spend more wisely?  He has an income now, after all.  A way to pay those bills, or at least the minimum balances.

I don’t know what the best method is.  Thoughts?

Megan Smith

Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:

In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance.  It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information.  It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck.  While that was working for me, clearly I needed a better plan.

While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.

Except that’s not what an emergency fund is for.

So I did a lot of research, read a lot of blogs, and decided that I needed a plan.  I needed to budget.  I needed to know what I was spending my money on.  I needed to prepare for the future.

I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way.  I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.