Getting Your First Credit Card: 6 Expectations vs. Reality

Getting Your First Credit Card Expectations vs. Reality
In Hollywood movies, characters are often seen using their parent’s credit cards with no consequences. These actors swipe their plastic while they shop for designer handbags or even a new car. You will never see the scene where the aftermath of their actions occurs. These scenes are excluded to deceive you because the expectations of every aspect of a credit card are almost always different than the reality of one.

1. A credit card will allow me to spend as much money as I want, right?

Expectation: It seems like most of my peers have credit cards, which gives them the ability to buy whatever they want. This makes me want to have more flexibility to buy my favorite products too. Applying for my first credit card means I will soon be able to spend however much I want.

Reality: Although spending as if you have no credit limit might seem fun, you will have to pay back the money eventually. Not all credit card applicants can responsibly handle a large amount of credit at one time. Therefore, credit card limits are often determined based on the individual's credit history and information provided during the credit card application process.

A credit limit is the amount of credit that you are allowed to spend each month. Also known as a credit line, it is approved based on the quality of your credit and your ability to pay it back. Only with the responsible use of credit over time will your monthly credit line increase.


2. Is there only one type of credit card?

Expectation: My parents and my friends all have the same type of credit card. My family instructed me to get that same card. I have not been exposed to any other options so there must only be one type of credit card that I can pick from. How do I choose my first credit card?

Reality: There are many different types of credit cards. For those who have never had a credit card or loan to build their credit history, there may be fewer credit card options available. Common types of credit cards for college students to know about are student credit cards and secured credit cards.

Student credit cards are appropriately named, as these cards are created with the needs of college students in mind. Student cards can be very helpful for those with non-existing credit. Issuers that offer these types of cards generally offer exclusive perks to students. This is one of the best cards to choose from if you’re looking to begin building your credit while attending school.

Secured cards get their name because you have to provide some type of down payment, or security, to be able to open an account. These cards are good for people looking to establish credit or to rebuild poor credit. If you do not make your payments, the lender can take money out of your deposit to pay your debt.

Because credit cards can have perks or annual fees, you must pick the one that is best for you. As a general practice, never borrow more than you can pay back, and always pay on time.


3. Does a credit card replace my need to budget?

Expectation: Now that I have applied for and received my first credit card, I won’t have to keep track of my expenses anymore. The credit card company will issue me a statement at the end of the month, so I can charge multiple purchases to my card as long as I stay within my credit line.

Reality: Unlike paying with debit cards or cash, credit expenses can be easily forgotten about until they show up in next month’s credit statement. This can lead to a false illusion of how much money you have left to spend each month. Creating a new category in your budget titled ‘Credit Card Expenses’ will provide a better representation of the actual amount of money that you have leftover.

Other credit-related expenses, like late fees, can also sneak up on you. It is important to look at the criteria of multiple credit cards to determine which will fit the best in your budget. Keeping track of all your credit expenses is important when managing your budget and avoiding budgeting mistakes.


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4. Should I only repay the minimum balance?

Expectation: My balance was higher than I expected because I got a little carried away on my shopping this month. I can save money by only paying the minimum payment each month. It will be cheaper to only pay the required amount, and I’ll have more money in the short term.

Reality: Whenever possible, you should strive to pay back the full balance of your credit card statement each month. If you carry a balance from your previous statement into the next statement, you will be charged an interest rate. Interest rates are a cost of borrowing money. This interest can add up quickly. If you’re not able to pay the entire balance, then aim to pay more than the minimum, if possible.

It’s ideal to treat your credit card in the same context as you would a debit card. Debit cards will generally only authorize the purchase if you have the money in your checking account. To reduce the likelihood of accruing a large amount of debt that will show up on future credit reports, pretend your credit card will only approve the purchase if you physically have the money.


5. How do credit cards affect my credit score?

Expectation: I recently opened a new credit card. To increase my score, I need to constantly charge products and services to my card. If I don’t make purchases all the time, having a credit card will not affect my credit score.

Reality: When you apply for a credit card, it is considered a hard inquiry. This means you have given a potential lender your permission to look through your credit history. They will use this information to decide if they want to approve or deny your credit application. It is also used to determine how much credit will be offered to you. When a hard inquiry is performed, it can potentially cause a temporary decrease to your credit score.

The most effective way to make a positive impact on your credit score is to be responsible with your credit. Always make regular payments on your card, as missing a due date can hurt your credit score. It’s also beneficial to maintain a low credit utilization ratio, which is the comparison between the amount of credit that you are currently borrowing to the amount of credit that is available to you.

A higher credit utilization ratio means that you are borrowing more money from the credit issuer, which has the potential of leading to an accumulation of debt. Your credit score can determine whether or not you will be approved for future loans. This is important when it comes time to make a major purpose, like a car or a house.


6. Can I avoid credit card fraud?

Expectation: I know that I should be careful with my credit card, but I don’t know how to keep my credit card information safe. I’m under the assumption that if someone was able to get my credit card information, I wouldn’t be able to recoup the expense.

Reality: Credit card fraud can occur when you lose your card or when you share your information with the wrong person by accident or on purpose. If you believe your credit card account has been compromised, you should alert your card issuer as soon as possible. You will not be held liable for any unauthorized purchases that happen after.

There are preventative measures you can take to help ensure you don’t become a victim of credit card fraud, such as using machines with chip readers and not storing your information on online shopping websites. You should always check your statements and make sure they match with your purchases for the month.


Before you get your first credit card, you'll likely have many credit card questions. Unlike the actors in the movies you watch, you will have to deal with the consequences of purchasing that hot tub or new motorcycle on credit. When used wisely, a credit card can provide an abundance of benefits, but these can be taken away just as quickly.


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