In this blog post, I wanted to talk about 7 regrets that I have had with credit cards and money over the past decade of my life. Now I’m 26 right now, so I’m still pretty young, and I usually don’t like to live my life with too many regrets, but looking back over the past 10 years or so of my adult life, there are a few certain things that I can look back on and see that I’d be so mad at myself for doing right now. Fortunately, we all tend to learn and grow as we live our lives, and we all make different mistakes, so hopefully, talking about some of the things that we’re going to talk about here in this blog post, that’ll help you not live with the same regrets that I have.
- Waiting Too Long To Get My First Credit Card
Let’s get right into it with my first regret, which is waiting too long to get my first credit card. Now, I was actually almost 21 years old when I got that first credit card, and with that first card, the main purpose was to basically build up my credit from zero, so let me explain what my mindset was behind waiting so long to get this first credit card because that is going to explain why this is my first regret. So around the time that I was turning 18, I had this huge interest in business and investing money, but I really never thought twice about credit cards. My mindset was, Well, for anything I need to purchase, I’m just going to use my debit card because the money is already inside of my bank account, so when I swipe that debit card, the transaction, and that purchase are going to essentially be settled immediately.
I’d swipe my debit card, and the money would then be taken out of my bank account to pay for it, and that was it. With credit cards, it seemed like there would be this whole extra step, so I would use the credit card to pay for something, then I’d have to go pay off that credit card balance before it started accruing interest, and at that time, I really did not have the greatest understanding of how a credit card statement worked or when to pay off my balance. On top of that, I also had read some stories online where I saw things on the news talking about credit card debt and how bad it was for millions of people, so I said to myself that I would just stick to a debit card for now because it seemed like credit cards would do more harm than good.
Now, a couple of notes from that one, this type of thinking is what many people have, and depending on your situation, you might be right that credit cards are not worth it for you. If you don’t think that you can put in the time to learn the basic ins and outs of credit cards and how to use them the right way, or if, depending on your financial situation or your spending habits, you might be more likely to carry a high-interest credit card balance, then you can say to yourself, All right, I’m going to stay away from credit cards right now because they might be a little bit too much trouble for me.
But if you realize that credit cards can be a good opportunity to build credit increase your credit score and potentially save tens of thousands of dollars on something like a mortgage in the future all while earning credit card rewards while treating your credit cards like cash or like a debit card, then you can be like me and come to the realization that credit cards can be a good thing too. But my initial negative mindset towards credit cards kind of just continued on until I got to college at Penn State throughout my whole freshman and sophomore years.
And eventually when I moved out of the dorms and started living in an off-campus apartment Things started to change a little bit. Now that I was off campus, I started using my debit card and cash to pay for more and more things because I no longer had to use my student ID or the prepaid meal points on that ID to pay for things like food. But around the time that all those things were happening and as I was turning 21, I was also entering into some of my major core classes as a finance major, so I was getting introduced to all these different finance topics that included credit cards, credit scores, and all the benefits of those things that I just talked about.
Then one day my mom showed me a credit card offers that we got in the mail from Wells Fargo for a college cash-back credit card so I decided to go ahead and apply for that and I got approved. Now, like I said before, my goal with this first credit card was to start building credit so that I could have a higher credit score in the future and then benefit from all the good things that a good credit score can offer me. But by waiting until age 21 instead of age 18 to get that first credit card, my age of credit, one of several credit score factors, was not as high as it could have been if I had a credit card for these few additional years. Now payment history and credit utilization are much more important factors when it comes to your credit score compared to the age of your credit, but still, by the time I graduated from college, my credit score was not as high as it could have been.
- Still Using a Debit Card For Almost All Of My Purchases
And this leads me to my second regret with credit cards and money, which is that I am still using a debit card for almost all of my purchases even though I had that first credit card. So like I said, I was 21 and I had my first credit card, but the sole purpose of that card was mainly to build credit, so I would use the credit card maybe a few times a month for some small grocery purchases, and then I would pay off that balance on time and in full every single month, which is the right thing to do, but then I would just use my debit card for pretty much every other purchase.
- Using That Debit Card To Withdraw Cash At ATMs
And really quickly here as a 30-second side note for my third regret in this blog post, because it’s so stupid and self-explanatory, that is using that debit card to withdraw cash at ATMs where I had to pay fees. So my debit card and my bank account were with Wells Fargo and there were no Wells Fargo locations anywhere near me when I was at Penn State, at least at the time that I was there. So I would just go to any ATM nearby whenever I had to withdraw some cash. I would get warned that there was going to be a $3 fee for withdrawing that cash from that ATM but I really didn’t think anything of it and I just went ahead and withdrew the cash anyway. Well, that’s just really really stupid.
I might as well have just burned $3 so I probably paid a few hundred dollars worth of ATMs over the time that I was in college and that’s just really dumb to think about. So do not pay ATM fees. Open up another local bank account that has ATMs nearby that will not charge you fees or open up something like a SoFi bank account because they have an ATM network that doesn’t charge any fees as well and that’s what I use but the bottom line does not pay ATM fees. I definitely regret the hundreds of dollars that I just wasted there. But anyway, back to my second regret of using my debit card for the majority of my spending, there are a couple of things that I wish I did differently looking back on it now.
First, I wish that I would have gotten a better student credit card than the one that I did so that I could use that in place of my debit card. The Wells Fargo College cash-back card that I got was not too bad but I’m pretty sure it’s not around anymore. It only gave 1% back on everything, and there was no welcome bonus or anything like that. Now there are certain student credit cards and secured credit cards that offer cash back at much better rates in different spending categories.
They also can offer sometimes welcome bonuses and even a credit that will give you for getting good grades. So I wish that I would have gotten a better student credit card when I was in college that would have better fit my lifestyle, maybe something that earned cash back at higher rates at grocery stores and restaurants because that would have provided a lot of value to me.
Now the second thing that I wish that I had done was use my student credit card for more things than just small grocery purchases. Because I was using my debit card for most of my spending while I was in college, especially as I was going out at night, not only did I miss out on getting a ton of cashback from different spending categories that credit cards could offer but I also kind of put my money a little bit more at risk.
The one that I was using just does not offer the same protections that credit cards do. I lost my debit card a few times but luckily I realized it pretty quickly I would just go into my app, lock the card and then order a new one but if somebody found that lost debit card and then used it they could easily have access to the money that was in my bank Account.
I would then have to go ahead and report that to the bank and the process to get that all fixed could take some time the worst part is that until the issue is resolved the money and many cases would be missing from my bank account. With a credit card if I lost that and then somebody used that to go ahead and make an illegal purchase without my authorization, I can go ahead and report that to the credit card company many credit cards come with something called zero liability protection which basically means that the credit card company will just get rid of that charge from my credit card statement.
They would get rid of that charge and investigate it on their own, so I wouldn’t have to worry about paying back any of that money. So the main point from these first two regrets is that credit cards have many benefits and many advantages over debit cards, but that can be kind of hard to see if you have this negative or indifferent view towards credit cards as I did at first. But really using a credit card the right way will help you to avoid interest, build your credit score, earn cash back or points with certain credit cards, and give you some other protections that other forms of payment just can’t.
- Not Budgeting
All of this also comes with the assumption that you’re not overspending on your credit card and this brings me to my fourth regret here in this blog post and that is not budgeting. When it comes to budgeting, I do not want people to think of a super strict way of eliminating all of your expenses and cutting all the joy out of your life. Budgeting to me is really all about self-awareness and there really is this power and this comfort that comes along with understanding where all of your money is coming in from and where it’s going out to.
I love this idea of spending with a purpose, just laying out all of your expected expenses for one month and then comparing that to your expected income for that month. That right there is more work than most people will do so my regret with not budgeting was simply that I was relying on the number in my bank account. if that number was going up when I was receiving my paychecks each month then I just assumed that was a good thing. But that was such a dangerous way for me to think especially after just graduating from college and working my first full-time job. I was fortunate to get a job that was close enough to my parent’s house that they were going to let me stay there rent-free for just under a year.
That way, hopefully, I could get a head start financially and save more. And that was great; I’m very thankful that I was able to be in that position but since rent is usually the biggest expense within our budget of course the number in my bank account was going to go up each month because I wasn’t paying rent. But what I did not realize was how much money I was spending on useless things, so if I went to the grocery store I really wouldn’t check the price of the food that I was buying. I had too many subscriptions, really just too many expenses that I wasn’t aware of. Eventually, when I did move into my first post-college studio apartment in Philadelphia, I started to budget all of my expenses to see where my money was going because I now had that rent expense added to that budget, and I was shocked at how little I was actually saving.
So I made some adjustments here and there and it wasn’t that hard but the first step was self-awareness of my spending habits through budgeting. So that’s my regret that I did not do that sooner because I could have been saving more money and then investing that money or using it in another way that was much better than how I was spending it. So that’s the lesson from this regret for anyone that’s reading this. Go ahead and just try out a budgeting method for three months, get a general understanding of what your average monthly expenses are, then go from there and remove any excess and unnecessary expenses and see if that helps with the amount of money that you’re able to save.
- Not Contributing To My 401k
Now onto the fifth regret that I have with my money and this is something that I’m glad I caught very early on and was able to make a change and that is not contributing to my 401k. So let’s just go ahead and say this, saving and investing for retirement is boring. But there’s this thing that many financial experts like to say when it comes to investing and that is boring is actually good.
Now 401ks are a very popular type of retirement account that’s offered by many employers and it was something that was available to me with my first job out of college. Each employer is going to have different options available as far as regular pre-tax 401ks or post-tax Roth 401ks but regardless for me, for the first four months that I was working in that first job out of college, I decided that I was not going to contribute any amount to my 401k.
Now my reason for not contributing at first was that I thought the cash would be better off in my bank account. That way I could use that cash to reinvest in myself, build an emergency fund or use it to help start a side hustle. And while these are all great things to do, these are all still things that you can do even when you’re contributing to a 401k and eventually I realize that that is what I should be doing even though I can’t touch the money in my 401k until I’m much much older.
But the main thing that makes me regret waiting for months to contribute to this 401k is something called the employer match which is what many employers do with 401ks basically they will match your contribution to your 401k so it’s like free money and it helps to incentivize people to save for retirement.
As an example let’s say that I decide to contribute 5% of my salary to my 401k account and maybe the employer has a policy where they will match your contributions to your 401k up to the first 5% dollar for dollar so right there you can see how that is basically free money. As I said that 5% match is just an example and every company out there is going to differ as far as how much they are willing to match some companies are going to be much better than others so make sure to go ahead and check with yours. But to look at this another way not only is that free money that’s going into your retirement account but it’s essentially an immediate guaranteed return on your investment.
Then both your contribution and your employer’s match have the chance to grow in the compound over time which is especially important if you’re younger and you’re reading this blog post because if you’re younger you’re going to have a longer time horizon for that money to grow in the compound which is very very effective at building up solid retirement savings. So yeah I’m glad that I realized early enough that it was a mistake not to contribute to my 401k and get that employer match but I do regret not doing that from the start.
- Trying To Pick Individual Stocks
And this leads me to the sixth and final regret that I have with my money this is something that some people might disagree with me on but that regret is trying to pick individual stocks to invest in. Now picking companies and buying their stock isn’t necessarily a bad thing to do as long as you’re doing your research as long as you’re not pouring all of your money into just one or a few stocks.
But that was the problem for me with any extra money that I had to invest outside of my retirement accounts I would just try to pick individual stocks because that’s what I saw people talking about on TV or that’s what I would talk about with others as well. I wasn’t really reading any of the annual or quarterly reports of these companies. I wasn’t listening to their earnings calls and I wasn’t even reading any professional analyst thoughts.
Instead, I was just basing a lot of my investments on emotion or some biased assumption that if a company was doing good then it must be a smart investment to make. But the problem is that picking the right stocks that will generate a good enough return over the long run each and every year is actually incredibly hard to do, even if you do the research. Let’s say that the S&P 500 generates a return of about 8% per year on average. Now if you could beat that by generating a 30% return one year or maybe 20% each year for 5 years straight, then that’s great. But can you do that consistently each and every year for 40, 50, or 60 years? Well, chances are that you can’t because if you could you would have a ton of people throwing money at you to invest it for them.
Many different studies and pieces of research have shown that consistently beating the market like this is very tough to do. So learning that even many paid professionals cannot consistently beat the market for decades at a time made me switch up my plan and now I focus a larger percentage of my overall investments into large index funds that track the market and then I have a much smaller percentage of my investments in a few individual stocks. That way I’ll hopefully have a much better chance of getting more consistent returns on average over the long run. Then the compounding effect can take place on the growth of my investments over 40, 50, 60 plus years and my wealth can continue to grow over time.
That focus on consistent compound growth is way more important right now especially while I’m young and in my 20s because my money has more time to grow so focusing on compound growth is what I’m doing right now. I’m trying to average it out over the long run and not trying to beat the stock market in any given year by picking individual stocks. I just regret that I didn’t learn this lesson a little bit sooner because I could have avoided a lot of stress and a lot of bad investments by picking individual stocks over the years. Instead, I should have just put that money into index funds and my money would have had a much better chance to grow consistently over time.
- Redeeming My Credit Card Points For Cash Back and Not Travel
The seventh one is redeeming my credit card points for cash back and not travel. This especially applies to Chase ultimate rewards points with my original Chase Freedom card. I got a welcome bonus there and I chose to redeem it for cashback right away once I got that welcome bonus. I would have been better off saving those points and then redeeming them by combining them with my Chase Sapphire Preferred to redeem for travel.
But yeah that is going to be my seventh regret is using credit card points for cash back and not travel. But let me know in the comment section below if you yourself have any additional regrets that I didn’t mention here in this blog post whether that’s related to credit cards, money, investing, or anything like that let me know down below.