‘Whenever I mentioned this idea to my Mother & Sister they said it’s a bad idea’: I want to start building credit with a low-limit credit card. Should I listen to their advice or go ahead with my plan?

Hi Money Minder,

I’m 20 years old and currently have no credit history. I thought a simple way to start building credit would be to get a low-limit credit card (maybe around $200) to use for subscriptions like Spotify Premium and my phone bill (totaling around $80). I want to pay off the card in full every month to show I can handle debt responsibly.

But here’s the catch – my Mom and Sister think it’s a terrible idea. They say I should avoid credit cards altogether. Mom even suggested getting a rewards card from a store I don’t even shop at.

I earn about $34,000 a year and have really low expenses since I live in a family-owned home with no rent or water bill. I don’t have a car payment either.

What do you think, Money Minder? Should I go for the low-limit credit card or listen to my family’s advice?

Thanks for your help!

Retired and Happy

Response from THE MONEY MINDER:

Hello There,

It’s great that you’re thinking about building your credit at such a young age, especially with no history currently. Your proposed strategy of using a low-limit credit card for your subscriptions and then paying off the balance in full each month is actually a smart move. It shows responsible credit usage and can help establish a positive credit history over time.

Regarding the concerns raised by your Mother and Sister, it’s understandable that they may be wary of credit cards, especially if they have had negative experiences with them in the past. However, when used responsibly, credit cards can be a valuable tool for building credit and managing finances. Starting with a low-limit card and using it for specific expenses like subscriptions is a practical approach.

As for the suggestion of getting a rewards credit card from a store you don’t frequent often, it can also be a good option. It may provide you with extra benefits like cashback or points, but make sure to still keep your expenses within your means and pay off the balance in full each month to avoid interest charges.

Given your current income and low expenses, it sounds like you have a good opportunity to start building credit without much risk. Just be diligent about making on-time payments, keeping your credit utilization low, and monitoring your credit report regularly for any discrepancies.

Remember, building credit is a gradual process, so be patient and consistent. If you stick to your plan and use credit responsibly, you’ll be on your way to establishing a strong credit history. Good luck!

Farewell from THE MONEY MINDER