Once, I was walking through the airport and I saw an airline sales rep was handing out applications for their company credit card.  I noticed in the crowd two young college students. I was sure they didn’t know that 10% of their FICO score was related to credit inquiries. 

The students did not know that as soon as they filled out that credit card application their FICO scores would immediately decrease!

I walked over to the two young men and whispered, “Did you know that as soon as you fill out this information your credit score is going to go down?”

They looked at me as if I was crazy, but after I showed them my business card they listened to what I had to say. 

Many people believe that obtaining a credit card is as simple as filling out any application that you come across—without negative consequence.  Most folks do not do any research either.  

Due to the fact that credit cards can be so dangerous if used inappropriately, each decision to apply for a credit card should be deliberate and done with tremendous care. 

Whichever card you choose, do NOT use this card for everyday use.  

The purpose of this credit card should be twofold:

  1. To establish a credit history
  2. To give you extra protection in case of an emergency.


Establishing a good credit history helps lenders to establish clear evidence that you are a responsible lender and increases your ability to purchase a home, car, etc.  

Make sure that you are able to get a sufficient line of credit.  Ideally, the credit limit of the card should be able to cover at least three months of expenses barring an emergency. 

NEVER spend money, outside of an emergency, that you can’t reimburse immediately.  

This card as part of an emergency fund should not replace your personal building of savings.  Use the card as a subsidy to whatever amount of emergency fund you have left to establish.  

Secured Card:  If you are not eligible to receive a credit card because of poor or no credit history, apply for a secured card. This is a card that is linked to a savings account that may be claimed by the bank if you fail to make the necessary payments.  

This arrangement of providing collateral “secures” the loan and allows the bank to take on riskier clients. With a secured card you give the bank a certain amount of capital to hold as collateral and the bank then gives you a line of credit for the amount that you have provided. 

You can then use your card as you would any normal credit card and will help you to establish a credit history.  Go to www.bankrate.com and seek out the best secured cards with no fees and good rates.  

Here are a few tips when looking at the services of various cards.

    1. Make sure  there are NO hidden fees for having the card.
    2. Check the interest rate.  If you have a decent credit history, you should be able to get an introductory rate below 10%.  This rate typically lasts for 6 months to a year. You might even be able to get a 0% rate for this period.  FICO score is a key number in this situation. If your score is above 750, then you should be able to get an excellent rate.  If it is below 750, you might benefit from getting your score above 750, and then apply for a card.  
    3. Figure out how they calculate the minimum due. Cards calculate the minimum due by charging around 1.5% to 2.5% of the outstanding balance.  The lower the number, the lower you have to pay back per month. However, the less you have to pay off, the more interest is allowed to build up.  I strongly urge that you always pay off more than the minimum due when you can. 
    4. Pay on time!
    5. Look out for mistakes.  Many times credit cards double charge you for items purchased, may fail to record a payment, or may charge too much interest on your balance.