Financial Friday: Getting your first credit card

HUNTSVILLE, Ala. (WAFF) - With a credit card, young adults can enjoy more financial freedom while building a solid credit history.

Redstone Federal Credit Union’s Patricia Lloyd said it is a win-win when used responsibly. She also said it’s essential for parents to talk to their kids to ensure they understand it could also harm their credit score if payments aren’t made on time.

Here are some key topics she says you can use while talking to your kids.

How it works: A credit card is a loan. You used the card to make purchases and pay for them when the bill (or statement) arrives, which can pay in part or in full. You’ll be charged interest on the balance you don’t pay off.

There are benefits: Credit cards are convenient and accepted almost everywhere. They can be used in an emergency, for instance, if your car breaks down or if you need fast cash in a crunch. You can also build a good credit history by using them wisely.

There are downsides: If you don’t pay off your balance, you’ll pay interest on the money you still owe. Late payments will hurt your credit rating and may incur fees. You may be tempted to overspend or rack up more debt than you can repay.

What are your options?

• Secured Credit Card- requires you to put down a deposit, equal to your borrowing limit. It’s a low-risk card because you can’t spend more than your deposit.
• Authorized User-allows you to use the card without liability for payments. If you’re an authorized user on your parent’s account, you’ll get to use a card with your name on it, but your parents will receive the monthly statements.
• Student Credit Card- intended for full-time college students, these cards vary on terms, fees, and interest rates.

Lloyd stresses the key to choosing your first credit card is to do your research first, manage your spending, and pay the monthly bill in full if possible and on time, every time.

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