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Should I Get A Credit Card If I’m Still Paying Off Student Loans?

If you have a pulse and a mailing address, you’ve probably been deluged with offers from credit card companies in the mail. They come in big, clunky envelopes and usually have numbers like $40,000 printed on the front in heavy font. Despite the endless (and annoying) letters, credit cards can be useful tools for your finances. You can smooth out your monthly spending, gain a safety blanket, and even rack up some impressive rewards. Additionally, your credit score will increase if you use them responsibly. But these cards can also wreck your finances if you aren’t careful.

Want to see some scary statistics that aren’t about student debt for a change? Americans haven’t been frugal with their credit cards. The average household with credit card debt owes nearly $17,000 and interest rates on credit cards can be obscene. Think the rates on your student loans are high? Credit cards will sometimes hit you with 20% or more, making it the most expensive debt a consumer can hold. If you spend recklessly, a credit card will cost you big time. And if you can’t meet your monthly payments? Your credit score won’t just drop, it’ll plummet like it’s attached to a falling cinder block.

But before deciding on whether a credit card is right for you, it’s important to learn exactly what you’re getting into. And with so many card options, it’s easy to lose sight of your goals. Here’s a few pointers on how credit cards work and which cards might be right for your financial scenario.

How Do Credit Cards Work?

Think of a credit card as basically a 30-day loan from the bank. Say you get a VISA with a $5,000 limit. At the start of each month, you can borrow up to $5,000 from the card provider interest-free as long as you pay it back at the end of the month. If you spend $450, you owe $450 at the end of the monthly billing cycle.

What happens if you don’t pay? Interest fees – and hefty ones. Unless you have an impeccable credit history, you’ll likely be stuck with a credit card interest rate between 16% and 22%. Your interest builds up daily when you carry a balance, too. If you carry $1000 from one month to the next on a 18% credit card, you’ll be paying 1.5% (or $15) in interest per month. It’s critical to only make purchases you can afford with your credit cards.

Which Card is Right For Me?

Getting a credit card depends on your specific financial situation. Getting a low interest rate is a good start, but that interest rate only comes into play if you can’t make your monthly payments. If you struggle to keep spending down, you might want to avoid the credit card scene altogether.

But if you’re a pro at budgeting, a credit card can help you out in a number of ways. Because of the intense competition, card providers often offer extra perks like cash back on purchases or airline miles. It may not be much, but a card offering 5% cash back on gasoline will have great value to someone with a long commute. Trying to save up for a family vacation? A card that gives back airline miles will get you discounted plane tickets. To find a credit card with rewards that benefit you most, check out NerdWallet’s ranking of best rewards for 2018.

What’s My Next Step?

Should you get a credit card? Unless money burns a hole in your pocket, the answer is yes. Credit cards help you establish a financial identity and your credit score will go up with responsible use. You can get cash back from certain purchases or earn points that can be redeemed for airline miles, gas, or even gadgets like iPods and tablets. But proper credit card use also requires tremendous discipline. If you can’t keep your spending under control, a credit card will only throw gas on the fire.

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