Nine months out of college and I'm finding that the real world is full of harsh truths: Napping in the middle of the day is generally frowned upon, an outfit based solely around leggings is never appropriate -- even at the grocery store -- and my financial decisions will apparently haunt me for the rest of my life.
At least that's what my parents, family friends, co-workers and other actual adults in my life keep telling me. In an effort to appease them (and in hopes of one day being able to qualify for a mortgage or car loan) I decided to dip my toe into the grown up world of finances by getting my first credit card.
Too bad I had no idea where to start. Staring at various credit card websites, I felt overwhelmed with all the choices. Did I want a card with a low interest rate or a low annual fee? Should I prioritize rewards and signing bonuses? Exactly how much of my life will I be singing away when I agree to the terms? And finally, how do I avoid ruining my credit history forever?
Turns out, I'm not the only one with questions. A sizable minority of the more than 5,000 credit card complaints received by the Consumer Financial Protection Bureau in its first few months collecting the grievances were about confusion over forms, interest rates and other issues that financial reform legislation was supposed to address.
"There are so many credit cards out there and the programs are relatively complex that it can be difficult to know what is a good deal and what isn't," Gary Leff, the chief financial officer at the Mercatus Institute at George Mason University and an expert on getting the best credit card for your bucks told me.
He suggested a variety of options based on my station in life and my rewards preferences, but his most important point? Pay off my balance every month in full or beware of the interest rates.
Thank god for Google calendar reminders.
Applying for one credit card seemed daunting enough, but Leff said I shouldn't be scared of applying for multiple cards.
"Every time they pull your credit report based on you initiating the request, it's a temporary drop in your score that basically has no effect after more than a year," he said. "The only time I wouldn't apply for multiple cards is in the year leading up to getting a mortgage."
Being a fan of baby steps, I decided to apply for only one card, which Leff recommended. He said if I planned to pay off my balance I didn't need to worry about the interest rate, so I prioritized getting a card with no annual fee and a good deal on rewards (1.5 points for every $1 I spend).
After filling out the form online and giving the company authorization to look at slew of my personal data, I gave myself a pat on the back. "Look at me, I'm growing up," I thought, until I found out that I was actually a bit late to the game.
Odysseaus Papadimitriou, CEO of credit card comparison site, Cardhub.com told me that it was "a big mistake" for me to wait until after I graduated to sign up for my first card. If I were still in college I would have had access to special card deals for students, he said. In addition, by only using my debit card and cash for late night pizza and bar tabs (and also books) I was wasting four years that I could've used building my credit history.
And as credit card companies and other lenders have tightened their standards in the wake of the financial crisis, there's no predicting whether someone with limited credit history will get approved for a card, apartment or many other types of loans.
"Banks can be weird, especially over the last couple of years," Leff said. "Now there's almost no way to know up front whether somebody with not a lot of credit history is going to get approved for a card or not."
Ultimately the company approved my application, but now I'm not sure what I should do with the card. Papadimitriou said that if I wanted, I could "lock it in a drawer" and still build my credit history.
"A lot of people are under the misconception that you need to spend on your credit card to build your credit," he said, noting that using the card would help me build my credit history a bit faster.
Leff added that only using some of my credit line would also help to boost my credit rating.
I'm pleased with myself for finally facing the intimidating forms and taking a step towards building my credit. But a part of me knows that I may not have taken the plunge had I not been able to talk to all of these experts -- something that your average recent college graduate or ordinary American has no access to.
My expensive liberal arts degree didn't come with any financial literacy classes or tools. And though they were very interested in me getting a credit card, my parents had little to offer in the way of advice -- my dad chalking up financial lessons to something that you "learn in the school of hard knocks." Apparently he's not alone in not wanting to discuss the topic.
Matt Towson, senior manager of community affairs at Discover, which recently launched a program to fund financial literacy in high schools, said most parents are nervous about teaching their kids how to make and spend money.
"Parents are more comfortable talking to their kids about sex, drugs and alcohol than they are talking about money," he said.