As a boy, Travis Tracy watched his mother struggle with credit card debt. As a result, he avoided credit cards until he was 23 years old. John Bovard, Ron Strobel, and Marcus Blanchard grew up listening to horror stories about credit card debt, so they stayed away as young adults. Marguerita Cheng says she was initially afraid of loans because her father warned her early on of interest and fee risks. And Justin Green didn't learn much about credit cards, so he didn't use one until he was 22.
Yet Tracy, Bovard, Strobel, Blanchard, Cheng, and Green each grew into certified financial planners who now regularly use credit cards to their advantage.
Here's what these pros would have liked to know earlier:
Credit cards aren't inherently bad
Tracy, a CFP in Durham, North Carolina and founder of Fortitude Financial Planning, grew up as the eldest child in a single parent household. "My mom always had problems with credit card debt, so it seemed like a bad idea," he says. So he waited until he was 23 before getting his first credit card, which he only applied for because he was moving and had to finance some purchases.
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He carefully paid off his debts and as his convenience with credit cards increased, he began using reward cards to get money back. Now at the age of 31, he earns cashback with his daily purchases and withdraws the balance every month to avoid interest. “My biggest lesson was how important credit cards are to your overall financial purchasing power,” he says.
They can help you build your credit
“I was always hesitant; There were stories of people trying to sign you up for credit cards and I was told, 'Don't do it,' ”recalls Bovard, now a CFP in Cincinnati and owner of Incline Wealth Advisors. “In Cincinnati, cash is king and credit cards are bad. My parents also emphasized this message. ”He also remembers being told that credit cards could lead to large debts.
As a result, Bovard stayed with debit cards until his early 20s. It was then that he realized that if he ever wanted to approve a mortgage, he would have to build up his credit history. “I was nervous, mostly because of the fear of forgetting a payment,” he says. He avoids this risk by regularly checking his account balance and eventually setting up automatic payments.
Now 32, he says he wished he had opened a credit card sooner once he started earning income so he could have built his credit sooner. “That could have resulted in a better loan history,” he says, which he now knows can result in lower mortgage rates when you apply for a loan.
Related: Americans are back to piling up credit card debt as mortgage leniency ends and prices keep rising
Credit cards offer fraud protection
After college, Ron Strobel, CFP and founder of Retire Sensably in Nampa, Idaho, decided to use a debit card instead of a credit card after hearing as a child that credit cards could lead to debt. Then when he was 22 years old his debit card was compromised with fraudulent charges and the $ 900 in his checking account immediately disappeared. It took months to get the money back. After that, Strobel switched to using credit cards for additional fraud protection.
“You should use a credit card for the fraud protection aspect. Every time you buy something, swiping your credit card instead of a debit card feels different because you know you're protected, ”says Strobel, now 32.
They can help you in an emergency
When Cheng, a CFP based in Gaithersburg, Maryland, was studying overseas in Japan in her early twenties, smoking and her host family's cats made her asthma worse. She had to find a new apartment quickly and buy a futon. This $ 300 purchase was made possible by her credit card.
“Without the credit card it would have been difficult for me to get out of this house. It taught me that in an emergency, having credit is important, ”she says. Her father, who came to the United States for $ 17 in the 1960s, had taught her that credit was powerful but also risky. "He always said, 'Don't spend money in the dark," which means fees and fines – it's just a waste of money, "she recalls.
“My father taught me well,” she adds. “I did not abuse credit. I've used it wisely. ”And her father was so proud of her (and concerned for her health) that he paid her 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 took out his first credit card when he was 19 while serving in the Marine Corps, but then quickly closed it after hearing horror stories about credit card debt . "I didn't really understand how it worked, how to build credit or anything," he recalls.
After having an experience similar to Strobel, where his debit card details were stolen and his bank account emptied, he finally got out his next credit card. Now in his mid-twenties, he was no less nervous about spending too much money and building up debt. “I didn't really understand that the interest rate doesn't matter if you pay it off,” says Blanchard, now 30.
He says he wish he knew that if you are worried about spending too much, if you are concerned about spending too much, which will limit the amount you can spend.
While that's true, there is one major drawback to this approach: a lower credit limit means you have less credit available. This can lead to a higher credit load, which is the part of your credit you are using, and it can affect your credit score. (Using well over 30% of your total available credit can have a significant negative impact.) That is, as soon as credit bureaus report that you've paid off or paid off the balance, the damage should go away.
“I look back and think, 'Damn it, I would have been better if I had kept the first card open. My credit rating would have gone from good to excellent, ”he says.
Read: High schools are finally teaching kids what they need to know about finance
"Never spend what you don't have"
"I grew up in a low-income family, so no loan came to my mind until I learned I had unpaid medical debt," said Justin Green, CFP and founder of Assist FP, a virtual financial planning firm based in the United States USA Boston area. Then, around the age of 22, he took out a credit card with a relatively low credit limit of $ 300 and paid it out every month so he could slowly build up his balance.
"The most important thing about a credit card is that you should never spend what you don't have on the card in cash as it can get into trouble and get you into trouble," says Green. “Even as someone who's into personal finance, I can see that it's very easy to spend more money on a credit card and you have to be careful,” he adds.
Learn more: 5 credit mistakes that can bite you
Now at the age of 29, Green is using multiple cards that he pays out every month and maximizing his travel rewards. He and his fiancé plan to use these accumulated points to pay for their upcoming honeymoon, which will take place in an as-yet-undetermined location. The only requirement? “Blue water,” he says.
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Kimberly Palmer writes for NerdWallet. Email: firstname.lastname@example.org. Twitter: @kimberlypalmer.