Why Young Adults Need to Use Credit Cards

Unfortunately, financial advisers have related mixed opinions when it comes to using credit cards. I say unfortunately, because there is nothing to dislike. I got my first credit card when I was 18 and have been using it since then. Not only has it earned me thousands of dollars in rewards since then, but it has added other benefits as well. Despite what people may think, using credit cards is an important action for any young adult to take. Here’s a list of reasons why you NEED TO START USING A CREDIT CARD if you are not already using one.

use credit cards


Reason # 1 – Build Up Your Credit

A few months ago, I accompanied my close friend to the Honda dealership to find a new car. She wasn’t interested in buying a new car, but she was looking to lease a car. My friend is almost 30 and had a good paying job. Her old car was dying and she needs reliable transportation for her job. Between that and a few other reasons, she wanted to lease. She had enough money to put money down and there was no doubt that she could pay the 2 year lease.

The only problem is that she was denied. Want to know why? Because she had never built up any credit history. (If you don’t know anything about credit, read this post about credit score and credit history, then come back to this post) She has a credit card, but it has a limit of a few hundred dollars and she never used it. Not until she got denied and I told her to start using it. She always used her debit card, not thinking that it mattered. But it does matter! Using your credit card is one of the easiest ways to build up your credit. Credit is important for these types of things. If you ever want to buy a home, a good credit score is essential. By using your credit card for 5-10 years as a young adult, you can show the companies that look at your credit score that you are a responsible person. It’s not a perfect system, but unless you can pay for a house in cash, it’s a system that you are stuck in.

Reason # 2 – Cash Back Rewards

Another great reason to use credit cards is to earn money without doing anything. Many credit cards offer 1-5% cash back on regular expenses. So, if you buy an item for $100 and your card offers 5% cashback, you will earn $5 that you can redeem from your credit card company. My wife and I use credit cards to cover most of our expenses. We don’t spend a lot of money, but just last year alone we got about $500 back in rewards. That’s money that I wouldn’t have if I bought things with my debit card or paid cash.

The thing you have to realize about credit cards is that they make their money off of people using them irresponsibly. They know this. In order to get more people using their cards (with a greater chance of earning money off of irresponsible actions like not paying off the balance each month), they provide incentives. This means that you can take advantage of the system by using a credit card for every purchase and getting a small percentage of each purchase back. Let me be clear: if you are going to use a credit card to get the rewards, you need to pay off the balance each month.

Reason #3 – Fraud Protection

Last, but definitely not least, is fraud protection. Almost every major credit card company today has a department to track and prevent credit card fraud. This means that if anyone ever uses your card illegally, you can fight it with the assistance of this department. I’ve even had my credit card company act proactively and prevent fraud charges from happening to me by issuing me a new card when there was a risk of my information being jeopardized. While I am sure there are things that this doesn’t protect you from, the important thing to realize is that using a debit card offers you no protection. Try getting your money back after someone withdraws it from an ATM.

In case it isn’t clear yet, young adults have a great opportunity to use credit cards to their advantage. By simply using 1 or 2 credit cards to pay for everything, not only can you earn a little extra money, but you can set yourself up with a great credit score/history that will help you later in life. As with everything financial, you need to think long-term. I was lucky enough to have someone tell me the benefits of using a credit card from an early age. It’s probably pretty rare for a 25 year old to have a 7 year old credit card account.

Which Card to Use?

I’ve had several readers contact me lately about which credit card to use. While most of the major credit cards are similar, I prefer to use a combination of credit cards. I typically use my Discover, Chase Freedom, and Costco American Express.

10 Responses to Why Young Adults Need to Use Credit Cards

  1. I agree wholeheartedly with #1 and #2. Building up good credit will help down the line with car loans and your first mortgage. I had a credit card since the day I turned 18 and when it came to applying for my first mortgage on my first home purchase, it was a piece of cake and I was approved without delay and fantastic terms.

  2. Good points! I completely agree with #1 and for the very reason you saw with your friend. Even if you’re only using a card several times a month for small items and paying them off it goes a good way to help start building that credit history.

  3. I agree young people should use their credit cards for all those reasons and more. They should learn how to use credit responsibly. It is one of th emost important skills you will ever need.

  4. I wish I had read this post 10 yrs ago. I started using credit cards 2 years ago. Before that I just didn’t see the difference between them and debit cards… the only thing hurting my score is my length of credit history. Thanks for th.e great article

  5. I too have had a credit card since I was 18. While I partially agree with your post, I also think it is a slippery slope. I know plenty of people who obtained credit cards with the intention of paying them off in full every month, but ended up swimming in debt within a few years. I agree there are benefits if you use them wisely, but I don’t think that it is a good strategy for people who have a hard time with self-control.

  6. Corey, you beer snob lol!

    I grabbed my first credit card at 18 and used it to build my credit. I was able to apply for a mortgage by 21 and own a rental property at 22. A credit card was my fastest access (and only) to credit.

    You forgot another reason — close the tab at the bar on a date! Swipe and go 🙂

  7. Good reasons for not ignoring credit cards when you are young. You need to be careful not to get sucked in to the American consumerism society, though. Otherwise, next thing you know you have 5 maxed out credit cards, along with some student loans.

  8. Credit cards are becoming a currency nowadays and having the right credit at the right time can really open doors to superior financial products. Luckily I paid attention to my credit score and always paid off my balance religiously and now it’s paid off. I get zero percent credit most of the time and have a really low mortgage rate which means I’m saving more and spending money on the things that really matter. Great insights and great posts.

  9. Great list, I think the most important one is building credit. Using your credit card responsibly can save you thousands later on in life. When you take out a mortgage the difference between a good credit score and a bad credit score could be up to 3 percent, this means that needless amounts of money are being flushed down the drain. For any youngsters reading this post I would urge you to use your cards responsibly and build a solid credit base.

  10. Before you unleash a young person with a credit I think it’s important they understand why they need to keep focused and disciplined. Blogs like these really help but I can’t stop thinking about how life would be easier if there was a personal finance subject at school. Great article, thanks for sharing.