Don't shy away from credit cards
"Credit cards have been demonized a lot, to the point where a lot of college graduates think they should use other ways to spend their money, like only using debit cards. I think that's a bad idea," says Kimberly Palmer, senior editor and personal finance columnist for US News & World Report and author of the book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.
That isn't to say Palmer believes you should apply for 10 cards and go for broke. "I'm not saying you should carry credit card debt. You should pay it off every month," Palmer says. "But credit cards can be very useful for building your credit history."
Your credit history is what the credit reporting bureaus use to create your credit score. Your credit score is a number between 300 and 850 that represents how responsible you are with your credit and how long you've been that way. The higher your score, the better.
And if you have a strong credit history and a high credit score, you'll get a much better loan rate when you buy a house or a car. Fear of going into deep debt is understandable. But staying out of credit won't help you in the future.
Ironically, if you have never, ever used credit cards, your credit history isn't spotless - it simply doesn't exist. When you try to buy a home or vehicle, lenders won't know if you are a good credit risk. You may find it harder to get approved for the amount you need, and you could end up paying a higher interest rate than if you had a history of using credit cards responsibly.