Let’s be real – illiteracy surrounding credit cards is a gendered and racialized issue.
According to the study In Our Best Interest: Women, Financial Literacy, and Credit Card Behavior, American men knew more than women when asked about interest rates, inflation, bond prices, mortgages and risk. Additionally, credit card issues, namely debt and plummeting credit scores, plague the Black community more than they do Whites. The Challenge of Credit Card Debt for the African American Middle Class divulged that middle-class Black Americans have lower credit scores than White middle-class Americans. It also showed that 99% of Black people who used credit cards to start their businesses had a hard time paying off the debt.
The implications of these reports potentially puts young Black women in a tough spot. So, as future business owners, and financially responsible young women, we have no choice but to be educated about credit cards. To give you all your best chance, we spoke with financial adviser Zaneilia Harris about a few ways to be smart about using credit cards.
“Having credit is a precious commodity that can either help you in building your wealth or hinder you from employment opportunities or buying a house,”
When asked about common misconceptions about credit cards, Harris said, “[credit cards] seem like free money, but [they] come with a price.” It’s important to be realistic about how much you can pay a credit card company back monthly.”
Harris also shared that it’s wise to stay away from credit cards until you are confident that you can handle the responsibility. “Having credit is a precious commodity that can either help you in building your wealth or hinder you from employment opportunities or buying a house,”, she sent via email.
So what should you do if you’re getting a credit card for the first time? Harris advised asking your parents to become an authorized user on their credit card. It will allow you to build your credit, while under the watchful eye of a trusted guardian. Personal finance company Credit Karma noted that this route shouldn’t be your longstanding plan though, as it won’t build your credit history. Also, if you’re an authorized user on a friend or an older sibling’s card aware, please beware. If they miss even one payment, your credit score could be negatively impacted.
“Obtain a secure credit card which is based off an amount that you have in a savings account.”
We then asked Harris about reasonable credit limits for those interested in stepping out on their own. She told us, “[o]btain a secure credit card which is based [on] an amount that you have in a savings account. So if you have $500, then your credit limit is $500. This a great way to build or rebuild your credit.”
Credit card companies are notorious for targeting college students and encouraging them to set up an impossible credit limit. Financial content platform The Balance detailed some of the sketchy past and current practices of credit card companies. For example, companies will pay campuses hefty fees to set up shop on campus and encourage students to apply for cards. So, you should totally ignore those credit card companies at your school because they are trying to take advantage of you with ongoing interest payments. If you stick with a line you can afford, Harris says should use the points from monthly payments to help add a bit of luxury to travel experiences, like “upgrad[ed] hotels or airline tickets.”
We know that some of us have already gotten credits cards and had not-so-great experiences. But have hope – all is not lost! If you’re at this point, Harris suggests seeking assistance from a financial planner. “You may need to come up with a strategy on what to focus on first,” Harris said. “[Focusing on one particular student loan] may not be the best strategy once someone looks at [your history]. They may see other ways to conquer the debt that you have, as well as create emergency money [and invest in yourself].”
We know that credit cards can be a little scary, especially if you’re unfamiliar with them. But keep in mind that ultimately, credit cards are tools that can help you prepare for the future. If you approach them with confidence and a plan, you can change the current narrative about women, the Black community and credit. So, spend wisely, sis!
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