6 Things All 20-Somethings Should Know About Credit Cards

Photographed by Rockie Nolan.
Fifty percent off your purchase here. 1,000 free miles there. When it comes to credit cards, the benefits are easy to see — while the downsides are often buried in the small print on the application.

But in order to fully maximize your credit card benefits (and minimize the damage), you have to know how they work. And the first rule is that those perks are not the main purpose of your plastic. "The point of a credit card is to build your credit score," explains Priya Malani, Refinery29's financial expert. "Think of your credit score kind of like a 'report card' of how reliable you are to pay back a loan." The better the score, the greater your chances of getting a mortgage, having a rental application sail through, or even getting a job. (It's totally legal for hiring managers to do a background check that includes your credit score; fair or not, some hiring managers assume a solid credit score means you'll be a solid employee.)

Sounds like a huge deal? It is. That's why it literally pays to know everything you can about credit cards before you slide one in your wallet. Click through to find the advice we wish we'd had before we opened a credit card.
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Illustrated by Paola Delucca.
"If you can trust yourself to not charge more than you can pay off, definitely get a card in college," Priya says. You'll be building your credit score before you'll need to make bigger financial decisions, which is great.

And if you don't trust yourself not to overspend, Priya recommends using Debitize, a website that links your credit card with your checking account. When you use your card, the site will take the purchase amount out of your checking account — and it will pay the bill off each month, too.
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Illustrated by Paola Delucca.
If you don't have a credit history yet, you're probably not going to be offered a card with a high limit. And that's totally fine!

"Take what they will give you, use it responsibly — a.k.a., pay your balance off on time and in full each month," Priya advises. And if you've paid off your bills on time for a few months, you can call the company to ask for a higher limit.
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Illustrated by Paola Delucca.
Priya advises people to think of credit cards as debit cards, rather than as "free money."

"Credit cards are actually the most expensive kind of short-term loan out there, with rates that can be north of 25% a year," Priya says. "But if you always pay your balance off in full, it's the best deal!"

If you can, Priya recommends paying your credit card balance off earlier than the day your statement is due, because it can help your credit score go up. Using less than 20% of your credit limit at a time can also increase your score. (It's the "free money" lure that will get you into trouble.)
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Illustrated by Paola Delucca.
It's important to know your acronyms — APR and APY have little in common, and if you're opening a credit card, APR is the term you need to know. The acronym is short for "annual percentage rate."

APR refers to interest on your credit card (which you won't accrue if you pay it off in full each month), Priya explains. The lower your APR, the better, of course — but if you open a card with a high APR, you still won't have to pay that percent in interest if you pay the balance off on time.

If you see the acronym APY, meanwhile, that stands for "annual percentage yield" and refers to what you earn with online savings accounts. "You don't earn much at big banks," Priya says. "Places like Chase, Bank of America, and Citi only pay, like, 0.01% on basic savings accounts, compared to more than 1% with online banks."
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Illustrated by Paola Delucca.
"If the benefits of the card pay for the annual fee, it can definitely be worth it," Priya says. If there's a card that matches your lifestyle, the annual fee might pay off quickly — the same way, say, the price of a membership to a warehouse club would.

For example, if you're a frequent traveler, a card that comes with free checked bags could be worth the annual fee, Priya says.
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Illustrated by Paola Delucca.
While the best plan of action is to avoid credit card debt, there are still actions you can take if it does happen.

"You can sometimes call a credit card company and ask them to lower your interest rate, but that usually doesn't work because that's how they make their money," Priya says. "Instead, you should consider a balance transfer. There are deals out there where you pay no balance-transfer fee and no interest for 15 months."

Still, you'll probably need a good credit score to get a balance transfer. If you don't qualify for one, you may need to take out a personal loan, Priya explains. But the best solution is to not overspend on your credit cards so that you don't reach that point.
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