While a daunting task for many, establishing credit at a young age is imperative for financial longevity. Here are seven tips for millennials to help them efficiently establish credit and remove the fear associated with the four-letter word: debt.
1. Get a credit card. Which came first, the credit or the credit card? It's a common catch-22: You need to establish credit in order to get credit, and although your first card will come with a seemingly minute limit, you have to start somewhere. The earlier you start, the easier it will be in the future to purchase things, such as a new car or your first home. Plus, establishing a relationship with your bank early on will make getting loans or mortgages later in life less of a daunting task.
2. Start simple. Use your credit card for fixed costs, such as your gym membership, cell phone bill, Wi-Fi, Netflix and/or groceries. You're already spending that money every month, so you'll know the exact amount you need to pay off, and you might as well improve your credit rating while you're at it. Set up your bank's credit card autopay to handle the bills for you, and never miss a payment.
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3. Treat it like your debit card. The best way to not overspend is to keep a watchful eye on your accounts and only charge what you know you can pay off. Always make sure the amount you owe on your credit card is less than the amount you have in your debit account.
4. Get an ugly credit card. Don't be tempted by fancy cards with hidden fees and seemingly beneficial rewards. Get a basic credit card that doesn't encourage you to use it for more than you need to.
5. Don't let the points fool you. Credit card points are a great perk, but they're also an incentive to spend more. It's a slippery slope when you get hooked on earning points and end up paying 20 percent interest on each of your purchases. Instead, think of the points as an added bonus. Let them stack up naturally, and use them to buy necessities, such as grocery or gas cards.