Overcome fear of credit cards now, reap benefits later

Young adults who are afraid of credit cards in the long shadow of the recession usually think only of the risks, instead of the role they play in the creation of credit, consumer credit experts say. That can hold them back from building the credit history they need to later, if they want to finance a car or get a mortgage.

Data from the Consumer Financial Protection Bureau shows that approximately half of the people in the age 18 to 34 had at least one credit card in 2015, compared with 60 to 80 percent for people 35 years and older. Last year, an analysis of Federal Reserve data by The New York Times found that slightly more than a third of these young adults, or millennials, had credit card balances, an indication of whether there are people who use their cards.

Credit card issuers in the past marketed extensively to young people, especially students, who helped them establish a credit history. That ended with a federal law in 2009 that made it more difficult for people under 21 to obtain a credit card. Lingering memories of the economic downturn, to the left younger adults are wary of credit cards, even when they were eligible.

“One of the reasons why millennials are terrified of credit cards, because many of them watched their parents get in trouble during the Great Recession,” says Beverly Harzog, author of several books on credit cards, consumer credit and debt management, including “The Debt Escape Plan.”

“Fear partially comes from the unknown, of not having used a credit card,” says Mikel Van Cleve, a personal finance advice-director for the financial services provider USAA.

Here are five common questions and answers that can help you credit newcomers understand credit cards and overcome their fears.


With the help of a credit card is the fastest and easiest way to build a credit history. And you don’t have to go into debt to do it. Use the card to buy only what you can afford, what you would otherwise pay for with cash — and then pay the balance each month.

“Don’t think about debt. Think of a credit card as a tool to build credit,” Harzog says. “You want to build a credit history, because it will help you throughout your life.”

Your credit score is a measure of how much you can be trusted to borrow money: you spend within your means? A refund of the money on time? With the help of a credit card in a responsible manner, it shows your ability to meet your financial obligations, and build your score. A good credit score can make the difference between a loan approval and rejection, and you will get a better interest rate.


Just as the use of credit cards responsibly can build your credit cards, using them irresponsibly can cause damage. The piling up of debt, maxing out the card, paying late or missing payments hurts your score. The fear of these things is what drives the fear of the credit cards, but not these things happen: how to Run a credit card does not mean going into debt or buying things you can’t afford.


Newcomers credit have a few options. The first one is a secured credit card . With this, you can have a refundable deposit — say, $200 or $500 — and this becomes your credit line.

“Each month, if you make a payment that is reported to the credit bureaus,” Van Cleve says. In time, with responsible use, you will be able to move up to a regular, unsecured card that offers rewards or other benefits.

Another way to start is to have an authorized user on the credit card of someone else, such as a parent. But not all issuers report approved-the activities of the user. “As long as the history is reported, you’ll get credit for the Harzog says.


Credit card interest rates are referred to as APRs, or annual percentage rates. The bad news: Your first map is probably a high APR. The good news: “If you pay your balance in full, you do not have to worry about your APR,” Harzog says.


Most credit card fees are avoidable, including extra costs, and cash-advance fees. Many cards do not charge an annual fee, so look for one of these if your anti-fairy. Rewards cards often charge a yearly fee, which can be worth the effort if you have plenty of benefits back.

Avoid cards that charge monthly maintenance fees or for which an application fee or administration fee for your account is even open.


This article was provided to The Associated Press by the personal finance website NerdWallet . E-mail staff writer Ellen Cannon: . Twitter: @ellencannon.


NerdWallet: What is a credit card?

Consumer Financial Protection Bureau: The Consumer Credit Card Market

The New York Times: How Millennials Was Chased by Credit Cards

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