As a child, Travis Tracy watched his mother struggle with credit card debt. Therefore, he avoided credit cards until the age of 23. John Bovard, Ron Strobel and Marcus Blanchard grew up hearing horror stories about credit card debt so they stayed away as young adults. Marguerita Cheng says that she was initially afraid of credit because her father warned her early on about the risks of interest and fees. And Justin Green didn’t learn much about credit cards, so he didn’t use one until he was 22.
And yet, Tracy, Bovard, Strobel, Blanchard, Cheng and Green have each grown up to be certified financial planners who now regularly use credit cards to their advantage.
Here’s what these pros wish they had known earlier:
Credit cards aren’t inherently bad
Tracy, CFP in Durham, NC, and founder of Fortitude Financial Planning, grew up as the oldest in a single parent family. âMy mom always had problems with credit card debt, so in my mind that seemed like a bad idea,â he says. That’s why he waited until he was 23 before getting his first credit card, which he only requested because he was moving and needed to finance certain purchases.
Good reading: “I’ve given them thousands of dollars over the past 15 years” – how a woman got $ 100 when her internet went down
He carefully paid off his debt, and as his comfort level with credit cards increased, he began to use rewards cards to earn money. Now, at 31, he is making money on his daily purchases and making sure to pay off the balance every month to avoid interest. âMy biggest lesson has been the importance of credit cards to your overall financial purchasing power,â he says.
They can help you build your credit
âI have always hesitated; there were stories of people trying to sign up for credit cards, and I was told, “Don’t do it,” recalls Bovard, now CFP in Cincinnati and owner of Incline Wealth Advisors. âIn Cincinnati, cash is king and credit cards are bad. My parents also insisted on this message. He also remembers being told that credit cards can lead to a lot of debt.
As a result, Bovard stuck with debit cards until his early twenties. It was then that he realized that if he wanted to get approved for a mortgage at some point, he would have to establish his credit history. âI was nervous about it, mostly because of the fear of forgetting to make a payment,â he says. He avoided this risk by frequently checking his balance and possibly setting up automatic payments.
Now 32, he says he wished he had opened a credit card earlier, as soon as he started earning an income, so he could have started building his credit sooner. âIt could have led to a better credit history,â he says, which he now knows can mean lower mortgage rates when you apply for a loan.
Related: Americans are racking up credit card debt again – as mortgage forbearance ends and prices continue to rise
Credit cards offer protection against fraud
After college, Ron Strobel, CFP and founder of Retire Sensably in Nampa, Idaho, chose to use a debit card instead of a credit card because he grew up hearing that credit cards could lead to debts. Then, at the age of 22, her debit card was compromised by fraudulent charges and the $ 900 in her checking account was instantly gone. It took months to get the money back. After that, Strobel switched to using credit cards for the additional fraud protection.
âYou have to use a credit card for fraud protection. Every time you buy something it’s different swiping that credit card instead of a debit card because you know you’re protected, âsays Strobel, now 32.
They can help you in an emergency
When Cheng, a CFP based in Gaithersburg, Md., Studied abroad in Japan in her early 20s, smoking and her foster parents’ cats made her asthma worse. She had to quickly find new accommodation and buy a futon. This $ 300 purchase was made possible by his credit card.
âIt would have been difficult for me to get out of this house without the credit card. It taught me that it was important to have credit in an emergency, âshe says. His father, who arrived in the United States in the 1960s with $ 17, had taught him that credit was powerful but also risky. âHe would always say, ‘Don’t spend money in the dark’ meaning fees and fines – it’s just a waste of money,â she recalls.
âMy dad taught me a lot,â she adds. âI did not abuse the credit. I have used it wisely. And her father was so proud of her (and concerned about her health) that he ended up paying his credit card bill for her.
You can keep your credit limit low
Blanchard, CFP and founder of Focal Point Financial Planning in Pleasant Grove, Utah, says he pulled out his first credit card at age 19 while serving in the Marine Corps, but quickly got it. closed after hearing horror stories about credit card debt. âI didn’t really understand how it worked, how you build credit or anything,â he recalls.
After going through a similar experience to Strobel in which his debit card information was stolen and his bank account emptied, he finally pulled out his next credit card. Now in his mid-twenties, he was no less nervous about overspending and getting into debt. âI didn’t really understand that if you pay it back, the interest rate doesn’t matter,â says Blanchard, now 30.
He says he’d like to know that if you’re worried about overspending, you can keep your credit limit low on the card, which will cap how much you can spend.
While this is true, there is one major drawback to this approach: a lower credit limit means you have less credit available. This can result in a higher credit usage rate, which matches the portion of your credit that you use, and can hurt your credit score. (Using much more than 30% of your total available credit can have a major negative impact.) That said, once the credit reporting agencies report that you’ve paid off the balance or canceled, the damage should go away. .
âI look back and I’m like, ‘Fuck, I would’ve been better off if I had kept that first card open. My credit rating would have gone from good to excellent, âhe says.
Read: High schools finally teach kids what they need to know about finances
“Never spend what you don’t have”
âI grew up in a low income family so credit wasn’t something that crossed my mind until I found out I had unpaid medical debt,â says Justin Green. , CFP and founder of Assist FP, a Boston-area-based virtual financial planning company. Then, around the age of 22, he took out a credit card with a relatively low credit limit of $ 300 and paid it off each month so he could slowly rebuild your credit.
âThe main thing to consider with a credit card is that you should never spend what you don’t have cash on the card because it can easily add up and get you in trouble,â says Green. âEven as a personal finance oriented person, I can see how very easy it is to spend more with a credit card, and you have to be careful,â he adds.
Learn more: 5 credit mistakes that can come back to bite you
Now at 29, Green uses multiple cards, which he pays off each month, and maximizes his travel rewards. He and his fiancÃ© plan to use these accumulated points to pay for their next honeymoon, which will take place at a location as yet undetermined. The only requirement? âBlue water,â he says.
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Kimberly Palmer writes for NerdWallet. Email: [email protected] Twitter: @kimberlypalmer.