Back home, I never had a credit card and honestly never felt the need for one. In my country, it is also not so easy to obtain one. Once I moved to the USA, I learned that this is very different: most people hold one. Usually, most get their first one pretty young, but it was different for me because I just got my first one at 30 while I was a student in the US. However, let’s discuss briefly why you need one as soon as possible and what challenges you might face in getting one.
The Basics of a Credit Card
A credit card might seem like a debit card to some, but they are different. While using a credit card means you are borrowing money from the card issuer, which you will need to pay back later, using a debit card means the payment amount is immediately withdrawn from your bank account. You can only use the money you have available in that account. Moreover, with credit cards, if the balance is not paid in full by the due date, interest is charged on the remaining amount; with debit cards, there are typically no interest charges since you are using your own money.
Benefits of Using Credit Cards
- Building a Credit History in the USA
Using a credit card will help you to establish a credit history in the USA. A strong credit history is vital for numerous financial transactions, including obtaining loans, getting better interest rates, and renting apartments.
- More security
In terms of security, credit cards protect against fraud through features like zero liability for unauthorized charges and advanced fraud detection systems. Additionally, many credit cards offer purchase protection and extended warranties on items bought with the card, giving you added peace of mind.
- Rewards and Cashback Offers
Many credit cards come with rewards programs that offer incentives for using the card. These rewards can include cashback, points, or miles that can be redeemed for travel, merchandise, or statement credits.
Lack of Credit History in the USA
One of the significant challenges for international students is the lack of a credit history in the USA. Since credit history from other countries is not typically recognized in the United States, international students often start with no credit profile. This lack of credit history can make it difficult to qualify for credit cards, loans, or other financial products. Without a credit history, you may also find it challenging to rent apartments or secure favorable terms for utility services. Personally, it took me one year to get approved for my credit card with one of the traditional American banks.
If you just arrived and have no credit history you could try one of these ways:
- Using an International Credit History: some programs recognize international credit histories (e.g., Nova Credit).
- Student Credit Cards: some banks offer credit cards specifically for students (e.g., Discover, Capital One).
How to use effectively a credit card:
- Paying your bills on time, avoiding unnecessary debt.
- Keeping your credit utilization low, I recommend about 10-30%.
- Monitoring your statements for errors or fraud.
What has your experience been like with credit cards in the USA? Share your stories or ask any questions in the comments!