I didn’t get my first credit card until I was out of college. I was afraid of those marketers who lined the main drag of campus on the first days of school, giving away free T-shirts and promises of easy money. I liked to shop, so it was inevitable that if I had a credit card, I’d run up thousands of dollars of debt, right? I’d heard plenty of cautionary tales. And my mom, who generally is the one I turn to for financial advice, discouraged me. She didn’t think I needed more than a debit card, and so for all of college, that’s all I used.
But all that time, I wasn’t building credit. So when I graduated and moved to New York, I didn’t have debt, but I did have a really hard time getting a credit card. I was rejected again and again, and I finally had to sign up for a card that required me to put down a cash deposit. In the years since, I’ve opened a few more cards. It turns out that even though I love to shop, I’ve never been tempted to pay credit for something that I can’t pay off in full at the end of the month.
But I’m no credit card expert. I’ve fallen for the store-card pitch (twice). A few years ago, I opened an American Express because it seemed like a sophisticated card to have in my wallet. I still cringe when I have to pay the annual fee. I’m not one of those people who knows how to take advantage of the points system to get free airfare. I have a pretty passive relationship with my cards. I use them to pay for everyday purchases and don’t think much about them beyond that.
But in my job, I inevitably end up talking with a lot of women about their money. And I was surprised to learn that many of you aren’t using credit cards at all. You’re using debit cards instead, much for the same reason that I did in college — because credit card debt seems terrifying.
While debt is bad, and I admire all of you for not taking it on, it’s also bad to not build credit. So I chatted with Priya Malani, our Refinery29 financial expert, and together we put together this handy credit-card primer.
Thankfully, credit cards aren’t very complicated. Sure, there are some weird terms (APR, APY), and for some people, the risk of abusing your credit privileges and going into debt is a very real problem (and for these people, it's better not to use credit cards). But for the rest of us, the plastic rectangles are essential for building credit (should you want to buy a home or a car one day) and make paying for day-to-day items a whole lot easier.
One important thing to note from Priya: Your credit card is not your emergency fund, and neither is your 401(k). Your emergency fund is your emergency fund, so if you make sure to have one, you’re not dependent on credit whenever you get into a pinch. That will help ensure that you don’t go into credit card debt, either.
Ahead, Priya and I walk you through everything you need to know about credit cards — the good, the bad, and the confusing.