Where to begin?

[MustacheMcGee]

Hi everyone, I'm new here.

As a early 20-something year old, I've been reading some of the articles on  this website in order to learn more about becoming financially independent.

http://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-hero-in-one-blog-post/
http://www.mrmoneymustache.com/2015/09/29/if-youre-not-getting-rich-in-your-20s-youre-doing-it-wrong/

  A while ago my father tells me that I need to start having a credit score and the way to do that is -> buy a credit card. I asked him what kind of credit card should I get, but I am told that I need to find out myself. I'm a full -time student at a university and I know next to nothing about how to take care of money. I've been fortunate b/c I'm going to school on a scholarship and i plan on working full-time this summer, but I am still confused as to what are the steps. I guess my question is what kind of credit card should I buy?

[Digital Dogma]

If you are just starting out and there are no offers available for no-fee cards, you may want to consider buying a costco membership and using the mastercard (or visa?) that you receive with your member photo. The savings you can keep by purchasing things like TP, shampoo, soap, etc in bulk from costco will likely cover the fee in no time.

I would never pay for a credit card, my goal is to harvest points off credit cards by paying them off EVERY month without fail. That way the credit card earns for me in redeemable points as opposed to me earning for the credit card with a monthly fee or interest payments.

Good luck and remember never to carry a balance, you will regret that in the future :)

[CmFtns]

You should most definitely get a credit card.

You don't "buy" a credit card because while some have an annual fee, most are completely free. However you must learn to use the card responsibly. You must be the type of person who will always pay the card's balance at the end of each month or learn to be that type of person. If you don't do that then a credit card is probably not a good idea, will get you in a lot of financial trouble, and will have the opposite effect on your credit score.

Right now you probably have a very low or nonexistant credit score so you will need to look into credit cards designed for people like you who are young and have little to no credit history

This was my first credit card and it gives 1.25% cash back if you pay your bills on time... I enjoyed it as a starting credit card and had basically no credit history when I was approved.
https://www.capitalone.com/credit-cards/journey-student/

[chemistk]

This was my first credit card and it gives 1.25% cash back if you pay your bills on time... I enjoyed it as a starting credit card and had basically no credit history when I was approved.
https://www.capitalone.com/credit-cards/journey-student/

+1 For the Journey card. I applied while in school (with no credit history, making $50-$100/week) and was approved the same day. I started out with  $300 credit limit which has now climbed to $10,000 (I graduated in 2013). After a few years, i was able to upgrade it at no cost to the Capital One Quicksilver card. I have no complaints with the service/ease of use.

Just be sure to pay it off on time!

[MustacheMcGee]

You all give some good points!

If you are just starting out and there are no offers available for no-fee cards, you may want to consider buying a costco membership and using the mastercard (or visa?) that you receive with your member photo. The savings you can keep by purchasing things like TP, shampoo, soap, etc in bulk from costco will likely cover the fee in no time.

Just realized both of my parents have a Costco card. So that could be a viable option.

You should most definitely get a credit card.

You don't "buy" a credit card because while some have an annual fee, most are completely free.....

Right now you probably have a very low or nonexistant credit score so you will need to look into credit cards designed for people like you who are young and have little to no credit history

This was my first credit card and it gives 1.25% cash back if you pay your bills on time... I enjoyed it as a starting credit card and had basically no credit history when I was approved.
https://www.capitalone.com/credit-cards/journey-student/

Thanks for letting me know about the annual fee, I didn't even know credit cards had them. Shows that there is a lot for me to learn huh? :)
 So it seems the link you sent showed the journey card to not have an annual fee, but the Purchase Rate is (20.24% variable APR). What exactly does that mean?

+1 For the Journey card. I applied while in school (with no credit history, making $50-$100/week) and was approved the same day. I started out with  $300 credit limit which has now climbed to $10,000 (I graduated in 2013).

Just be sure to pay it off on time!

Wait so does this still mean I will be making monthly payments for the Journey card? Or are you just talking in general about credit cards? Also,  just from what you just said, if I stayed on time with payments, the bank "raises the roof" on how much I can spend right? I'm just making sure I get all this.

[MisterOwl]

As a 23 year old, I'm also in the same boat. My current goals are early retirement as well as getting a free flight to Japan by travel hacking. I know Discover IT card is not a bad deal. 5% cash back on quarterly categories (If you don't mind that.) and 1% cash back on everything else, (Which can be thrown into some savings.) If you show you are responsible, they will increase your credit limit. They also have a promo right now where they will double your cash back for this year, so FREE MONEY.:)

[savingstldad]

You can always get a "secured" credit card from almost any bank.  This is where you give them money, say $500, and they give you a credit card with a $500 limit.  They keep  your money as collateral until you close the account and get your money back.  This will allow you to charge things to the card and pay them off regularly, building your credit score until you can get normal no-cost type credit cards.

[robartsd]

My credit union would not let me get a debit card on my checking account (I did have a plain ATM card, not a card that could be processed as credit), so I got my first credit card from them instead (which I qualified for because I was a student). Later I realized that a real credit card was a much better value for the responsible user than a debit card - with a debit card disputed charges are held unavailable from your account until the dispute is resolved, with a credit card you don't need to pay disputed charges until the dispute is resolved (plus of course any bonuses you can earn by using the credit card, though some debit cards have bonuses now too).

If you use the credit card for purchases and pay the statement balance (not just the minimum) on time every month, you don't have to worry about the interest rate (APR) on most credit cards - check the truth in lending statement for the details of the grace period on purchases. Paying even one penny less than the statement balance (my personal experience was a payment error of less than a dollar - probably less than the minimum finance charge - interest for 1 month of float was probably about 10x the portion of the balance not paid) will usually cause the credit card company to charge interest on your "average daily balance, including new purchases".

[EnjoyIt]

When I was in college, credit card companies set up tables in the student union and practically gave away credit cards.  The sign on bonus would be a slinky or a large candy bar.  Unless you have completely destroyed your credit in the past, getting a credit card will be easy.

the citi double cash back card for 2% rewards if the costco card doesn't pan out for you.  I doubt you will not get approved. Since the card is free, you should be able to keep it forever allowing you to grow your credit history and a higher credit score.  Honestly I think it is probably better than the costco card since it has no fees and it can be held onto for ever.  In the future you may not want the costco membership and it would be a shame to have to cancel it.

FYI, one of the items that counts toward your credit score is the length of time you have your credit card.

Just remember as other have said:
Always pay off your credit card bill.
ALWAYS!

[robartsd]

FYI, one of the items that counts toward your credit score is the length of time you have your credit card.

Yes, do look to get a no fee card that you will hold on to forever. The average age of accounts is important on the credit report, so opening a few no fee credit cards over the first few years you're establishing your credit can be very helpful. Eventually you might have an old unused credit card closed by the issuer, but even one transaction a year is probably enough to keep a card from being closed due to inactivity.

[Warlord1986]

I've had a good experience with Discover. I've been with them for over 10 years, they have no annual fees, and I get cashback every month. Something like 1% or 0.5%. They also have deals every two or three months where you get 5% cashback of every purchase.

[MilesTeg]

Thanks for letting me know about the annual fee, I didn't even know credit cards had them. Shows that there is a lot for me to learn huh? :)
 So it seems the link you sent showed the journey card to not have an annual fee, but the Purchase Rate is (20.24% variable APR). What exactly does that mean?

APR is the annual percentage rate. It tells you the amount of interest you will be charged in a year. So, if you have $100 on the card, after a year you will have $20.24 in interest. Of course, your balance will go up when you make purchases and go down when you make payments, so what it really means is that you get charged 1/12 of that rate every month on whatever balance you have that month (actually a bit more complicated than that, but that's the gist). So, if you buy $100 of items in the first month, at the end of the month you will get charged 1.68% interest ($1.68). Then you make a $10 payment, but buy $25 more in stuff (net $116.68 balance), so the next month you get charged 1.68% interest on $116.68 ($1.96) and your new balance is 118.64.

The "variable" part means that the bank that you have the credit card with varies your APR based on a base rate + modifier. The 'base rate' is the rate the bank is getting charged to borrow the money they are lending to you (yeah, they do that) + the rate they are charging you. The rate they get charged is called the "prime rate" which is what you hear about on the news when they talk about The Federal Reserve Bank "The Fed" setting interest rates. The Fed changes the prime rate as often as every three months.

IF you pay off your card every single month you can avoid getting charged _any_ interest at all while still building your credit score. So two rules to build credit:

* Buy everything you can with your credit card, but only if you actually have that money in the bank!
* Pay off your balance every single month.

In other words, use the credit card as a convenience tool, not to actually borrow money. This will build your credit and keep you from sinking into a debt hole.

Only actually borrow money with a credit card if it's an emergency situation.