This is what a credit card looks like! :)

So you might’ve thought Bwog Finance was dead….well, surprise! Like an old 80’s band, we’re back with the reunion tour you never really wanted but kinda just happened anyways. Welcome to a new edition of the Bwog Finance column, this time on the subject of credit cards.

What is a credit card?

When you buy something using a credit card, you’re basically borrowing money from the bank to buy something, and you pay it back later. It’s not a like a debit card, which takes the money out of your bank account immediately to pay for whatever purchase you’re making. You also can’t borrow an unlimited amount – the credit card comes with a credit limit (for example, $1000), which represents the maximum amount of money you can borrow on the card.

Why is having a credit card important – can I not just use my debit card forever?

Using a credit card is the primary way to build up your credit score, a term which you may be familiar with if you’ve seen those sketchy spam ads or random Forbes headlines. Your credit score is important because it’s basically like a weighted GPA that reflects how trustworthy of a borrower you are (I’ll explain later how/why it’s “weighted”).

So when you’re older, lenders will look at your credit score when you try to make a large purchase that involves debt – like a mortgage on a house, a loan for a car, etc. – because they want to make sure you’re able to pay off whatever large loan you’re asking for. If your credit score is high, you will be able to take out these large loans and may receive a lower interest rate.

The credit score is weighted by a number of different factors – this can include something like 35% if you pay back your credit in time, 30% how much of your credit limit you’re using up, 10% how long you’ve held your credit card, etc. etc.

If you’re someone who’s never used a credit card before (I’m assuming this because you’re currently reading this article), your credit score right now is probably 0. But don’t worry, because you can change this!

So what kind of credit card should I get?

There are soOoO many kinds of credit cards, and the search for your one true match might be a lil crazy. To help, here are the 2 main things you want to watch out for:

• Annual fee: Some credit cards will charge you a fee every year for holding the credit card (so the bank can make some extra moolah off of you). So ideally, look for a credit card with a $0 annual fee!
• Annual Percentage Rate (APR): This is how much the bank will charge you, if you don’t pay off a certain minimum of your debt each billing cycle – you can basically avoid getting charged this fee if you pay off your credit balance in full by the due date each month. It fluctuates because of the economy.
• There are a ton of other fees that different credit cards might charge you if you fuck up in various ways. Some examples include: a late payment fee, a foreign transaction fee (if you buy something outside the U.S.), a cash advance fee (if you request a cash advance).

Many credit cards also offer different rewards, like 2% cashback on dining and 5% cashback on gas, etc. These rewards are pretty self-explanatory – you’re probably going to want to choose something with high rewards for dining (because NYC, duh) or groceries (if you’re an upperclassmen without a meal plan).

Because I’m assuming your credit score is currently 0, you don’t have a lot of options in terms of credit cards. That is, many credit cards will reject you because you have no history of how trustworthy of a borrower you are. That being said, your best bet is to use a student-specialty credit card. These are credit cards that are designed for students and other kinds of beginner credit-holders, and this link has a whole list of different of student credit cards. I personally highly recommend (a.k.a.use) Discover it Student.

How do I apply?

You can apply for your credit card of choice online. Literally just look up “X Credit Card Apply” in Google and follow the links. The website will ask you a bunch of questions, like how much income you make, where you live, and some other demographical information.

After you fill it out, the bank will let you know within a business day or two whether or not you were accepted. If your credit card application was accepted, you will be sent your new credit card in the mail! I would personally use my home or some other secure address, just because I personally don’t trust Columbia Student Mail for super-confidential mail like that (identity theft whomst?).

How do I use a credit card?

There are three things to factor in when using your credit card:

1. First, you want to use your credit card to make relatively small purchases, at least relation to your credit limit. This is because part of your credit score depends on how much of your credit you’re using. The rule of thumb is to use no more than 30% of the credit limit. So like, if I have a $1000 credit limit, I would want to make a max purchase of $300, but preferably smaller.
2. Next, you want to also make sure you pay back your credit balance on time. This is related to making relatively small purchases – make sure you’re not buying some extravagant designer handbag or something that you know you won’t be able to pay back off your credit card!
3. Optional: You can also factor in what you get rewards for. For example, if I only got cashback rewards for groceries, I would rather use $10 of credit at Westside than Pressed Juicery.

So for example, say I’m going to Soho on a shopping trip with a credit cards that gives me rewards for dining. I would use my debit card if I want to buy a $50 top from Reformation, but I would use my credit card if I wanted to buy myself a small $5 dessert. That way, I could make sure pay back my dessert and get rewards for it.