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Experts Share Credit Newbie Lessons

Mary Lou Jay

May 15, 2013

Even the pros make mistakes when it comes to credit cards.

We asked five personal finance experts and bloggers to share their stories of their first credit card. Although they may be dolling out money wisdom today, most of them acquired it the hard way. Here's what they learned — and what you can learn from them.

The cost of fun
Jana Lynch, blogger at Daily Money Shot

Lynch got her first credit card when she was 18 and a freshman in college.

“I got the credit card because, A) I could; B) who didn't want the free T-shirt?; and, C) it made me feel grown up,” Lynch says.

Lynch used her card throughout college to fund fun for herself and her friends.

“I used it however I wanted,” she says. “In college, it was fun to throw down the plastic and have people give you the cash for their part — it was like free money!”

Unfortunately she didn't put that cash aside to pay the bill each month. By the time she finished grad school, the balance was about $8,000.

“I didn't know the price of not paying it off every month,” Lynch says. “I figured minimum payments were enough.”

Lynch calls the card her “gateway card,” the first of many on which she ran up balances. When she married, her husband had debt as well. It took them five years to pay off their cards.

Today, Lynch no longer uses credit cards.

“I learned my lesson the first time; no credit cards, no debt. For me at least,” she says. “There are plenty of people who can use credit responsibly. I don't think I'm one of them.”

Advice for first timers: Lynch recommends studying up on credit. Personal finance blogs — and your card's terms and conditions — are good places to start.

“Most importantly, only get a card if you feel you can be careful and responsible with it,” Lynch says. “Don't do it just because you can. Don't get suckered in by rewards points or a free T-shirt. It's not worth it.”

Credit-wise beyond his years
Scott Gamm, founder of
HelpSaveMyDollars; author of “More Money, Please: The Financial Secrets You Never Learned in School”

Gamm used his first card with care. After using cash during his first year in college, he applied for a credit card primarily to begin building a good credit history. His main requirement was that the card have no annual fee.

“I think that for your first credit card, rewards aren't something that should be on your mind,” he says. “If they are, you'll be tempted to use it for everything just to rack up rewards points, so it will end up costing you more money if you don't pay off the balance in full and get charged interest.”

Today, Gamm limits his credit card usage to manageable amounts so he can pay his balance in full every month. His occasional credit card splurges are ice cream and coffee, not big-ticket items.

Advice for first timers: Gamm advises new cardholders to track their cards online and set up reminders on their cellphones so they'll remember to pay their bills.

“Make sure you always pay in full,” he says. “Do anything you have to do to avoid those interest charges.”

An expensive misunderstanding
David C. Jones, Ph.D., president of the
Association of Independent Consumer Credit Counseling Agencies

Jones got his first card — an American Express — in 1970 after receiving a solicitation.

“I thought it would be prestigious to have one,” Jones recalls. “I was about as financially ignorant as you could imagine.”

What he didn't know was that American Express charge cards require that the balance be paid off in full every month. Carrying balances forward is not allowed.

“I got myself in trouble very quickly,” Jones says. “I remember the first things I bought were leather coats with a shearling lining for my wife and me. I paid too much for them.”

Advice for first timers: Jones suggests starting with a prepaid card to learn how to budget and use cards responsibly. When you do get a credit card or charge card, read the agreement carefully.

“The biggest mistake that people make is not understanding what they're signing up for,” Jones says.

Pushing her credit limit
Carrie Smith, blogger at Careful Cents

Smith got her first card when she was 18. It had a credit limit of $500, and that low ceiling was probably a good thing.

“Within two months or so I had maxed out the card. I was making a really small salary so it took me about six months to pay down that $500,” Smith says.

The experience taught her that what you can afford is a more important benchmark than your credit limit.

“To this day, I always remember how much I can pay off in a month and don't go over that amount,” Smith says.

Advice for first timers: Smith advises credit newcomers to think of credit cards as short-term loans.

“You can't think of it as an extension of your spending limits or spending capabilities,” Smith says. “It's something that you're going to have to pay back, and there are very high consequences of interest if you don't pay it very quickly.”

Paying for his mistakes — with interest
Anthony Mazzocchi, blogger at We Only Do This Once, executive director at Kinhaven Music School

The only advice Anthony Mazzocchi's parents gave him about credit cards was not to get one. But that didn't stop him from getting one on his college campus when he was 18.

“There was a table set up where they were offering credit cards aligned to your favorite sports team,” Mazzocchi says. “They were handing them out like candy.”

Mazzocchi's first purchase was a video game system, and, for the next 18 years, he carried a balance and paid interest.

“I would venture to say I might have still been paying for that video game system until two years ago,” Mazzocchi says.

Eventually he realized he was making a lot of money but was still broke because of all his bills. It took him two years to pay off the eight cards he acquired and end the cycle of debt that started with his first card. He no longer uses credit cards.

Advice for first timers: Mazzocchi is already educating his own kids about money matters.

“You have to know how credit cards work, but it's a little more about how personal finance works and budgeting, and how credit cards play into that,” he says.

Mazzocchi suggests tracking your spending habits for a month before applying for a card.

“Then decide very systematically how you're going to use a credit card to your advantage and why you are going to use it for something that you could use cash for,” he says.