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My little sister is 18, and currently has a bank account with a debit card. She and mom believe it might be time to get her a credit card, mostly to build up her credit rating than out of necessity.

The thing is, she fears she might abuse this new-found "power", especially for online shopping. Even a credit card with a relatively low limit of 500$ scares her for what it could do to her finances. She can be impulsive and knows it, which is why she has avoided getting one so far.

Are there any strategies, additional limitations or habits she could adopt to prevent impulse purchases? Should she even apply for a credit card to begin with? Thank you for your help.

Edit: Thank you all for the useful advice. I'll be sharing this page with her so she can make her own decision!

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    If you use them correctly, you end up getting ~2% back, extended warranties, price matching, and all sorts of other perks that are funded by people who use them incorrectly. They're perfectly fine when one treats them like a debit card by conceptually treating your limit as though it is what you have in your debit card. – Xrylite May 16 at 23:13
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    Maybe this would be a whole other question, but why does she want to build credit if she is afraid of abusing it? Building credit means you get more rope to hang yourself with. Are you focused purely on ways to safely build credit, even if they dont involve credit cards? – zero298 May 17 at 0:32
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    Why would she use a credit card differently than a normal debit card or cash? In the end it’s all money. – Michael May 17 at 6:28
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    She could ask the bank to lower the limit but ultimately there's no way to protect yourself from spending your own money. She needs to be able to learn self-control with money to function as an adult, and that is done (IMO) by really internalizing the idea that putting something on credit is spending your own money. Except in extreme emergencies it should be treated exactly the same as a debit card. – John K May 17 at 15:57
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    I agree with @Michael, she should treat it exactly as her debit card. Do not spend what you don't have. Perhaps look into a financial tracking tool like Mint, which can subtract your credit debt from your total savings, providing an "Available Funds" number. – Kevin Mirsky May 17 at 15:58

12 Answers 12

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Have her talk to her bank and ask if they have programs designed for people like her. If they aren't any help, consider switching to a bank with more of a customer-health focus. Many banks and credit unions have specific programs for people like her, to allow them to build credit with less risk (both for the bank and for her). Also, many financial institutions are happy to offer at least minimal counseling and they may have entire training/coaching programs designed to teach good habits. Unfortunately, these programs are sometimes not well advertised to the public so it helps to ask for them.

For instance, many financial institutions will offer secured credit cards, which means you put down a deposit equal to your credit limit before the card is issued (so, she'd have to have $500 on deposit in order to have that $500 credit card). Essentially, this allows the credit card to function more like a debit card (you're only spending money you already have, vs actual unsecured credit). But the card still gets reported to credit agencies as a credit account, which lets you build history.

There are also FIs offering programs where the card can be locked from certain uses (ie online shopping, travel, etc) unless the customer specifically calls and authorizes a certain purchase. If her spending habits have a narrow focus, that can help train her to be careful in her decision making.

That said, you have to consider that "building credit" basically means "proving you can handle risk" so in the end, while it can be helpful to use programs designed to protect the customer from their own bad habits, she really needs to focus on a method that will help her learn over time vs a method that will just handicap her from overspending.

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    The last paragraph is probably the most important point. – chepner May 16 at 13:41
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    I agree. There are lots of ways to pad a credit score, and lots of tricks and methods of "establishing credit history" - but ultimately, if your (inflated) score doesn't match your aptitude for decision making, you're setting yourself up for failure in the long term. The real focus for someone new to credit, or for someone who thinks they have an impulse spending problem, should be education, training, and habit-building - not just getting a certain credit score. – dwizum May 16 at 15:02
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    My first credit card was a secured credit card; I didn't sign on with parents or anyone else, but my credit union was very helpful to instructing me how to deposit the money and get the card. Their program was that after a year of responsible spending, the card could be graduated to a normal credit card, and the deposit returned. Fast forward several years, and I've developed a very healthy credit, having only not paid the card off on full once, and that was the month I accidentally typed a 34 instead of a 43 and left a balance of $9 on the card ;) It's a really good way to build good habits. – Davy M went to fund Monica May 16 at 15:03
  • My experience with credit score was push the number up so I could get the prime rate on a home loan then don't care. – Joshua May 17 at 17:29
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She and mom believe it might be time to get her a credit card, mostly to build up her credit rating than out of necessity.

Does your mother have a decent credit score? If so, then adding your sister as an authorized user but not giving her the card would boost your sister's score. That's what I did with my kids, and now they've got good scores.

The thing is, she fears she might abuse this new-found "power", especially for online shopping.

Then she shouldn't get one. My son had/has the same fears, and only got a CC after he joined the Air Force. Even then, it's a limited card that's only valid at certain on-base stores.

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    In Canada (as this post is tagged) authorized users do not build credit on someone else's account as they are not considered borrowers. – Victor Procure May 16 at 15:25
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    As @VictorProcure says, having her as an authorized user would not necessarily give the same credit score bump as having a credit card. If you want to go this route, then it would better for her to get a card and add her mother as an authorized user, and then let only her mother have the card. But as dwizum says, gaming the system isn't necessarily a good idea. – Acccumulation May 16 at 16:59
  • Another issue is that if the card reports authorized users to the bureaus (not all do), missed and delinquent payments by the account holder will also negatively impact the authorized user's score, even if the adverse event was no fault of the authorized user. – user71659 May 16 at 18:43
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A girl I work with has a quite extreme solution for impulse buying: she stores her credit cards in zip-lock bag, then puts it in water container and in turn leaves that in freezer. Gives her overnight to unfreeze it and reconsider her purchases.

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You could try some gimmicks

There are some classic remedies for impulse credit card spending like freezing the credit card in a block of ice in order to impose a waiting period while waiting for the thaw. That would be a very literal credit freeze. (: I'll see myself out now. :)

Another more drastic option is to open a credit line, set up an automatic monthly bill payment to prevent closure due to inactivity, then shred the card.

You could help her train herself

Probably the best option though (if you sister is willing) is to have you or your mom hold on to the card so that she has to tell one of you what she is going to purchase and why before she receives the card. It is not your job to judge whether or not she should make the purchase. You might provide feedback one way or the other as you hand the card over. The point of this exercise is for her to go through the process of reasoning through the argument of whether to buy or not. The expected outcome is that she will talk herself out of some of these purchases before she has to explain them to someone else. As mentioned elsewhere, she should not save the credit card details in the browser if this is going to be an effective strategy.

Over time, she will get into the habit of evaluating purchases more thoroughly in her head, and she will tend to be less impulsive toward purchases over time. After a few years of this, hopefully she won't need anyone to hold her card for her anymore.

We probably all benefit from discussing our purchase plans with others

This is unrelated to your sister's situation, but it's worth mentioning. I also recommend married couples set a spending limit and discuss all purchases above that limit together before proceeding. The purpose is the same; it's not about policing each other and arguing about every purchase, it's about avoiding impulse buys. If you can't make reasonable case to someone else about why you should buy something, chances are you'll regret that decision sooner or later. I've talked myself out of a lot of spending simply by thinking about how I would explain to my wife why I wanted it and realizing that I don't really care strongly to have it.

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    Actually, the physical credit freeze might not be a bad idea. Regular water without coloring might be too transparent, though. +1. – WBT May 16 at 19:08
  • @WBT: The better solution would be a small waterproof bag, to avoid damage to the card (especially those with a chip). – MSalters May 17 at 11:44
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How can sister protect herself from impulse purchases with a credit card?

Don't get a credit card.

There's quite a bit of research demonstrating that people spend far more money with a credit card - sometimes dramatically more. (In one study, participants were willing to spend twice as much for the same item when using a credit card vs. when using cash).

If she thinks that she'll be an exception to this, consider the fact that the vast majority of people consider themselves above average. For example, up to 93% of drivers consider themselves above-average drivers according to some statistics. According to the linked Wikipedia article, in one survey, 87% of Stanford M.B.A. students thought that their academic performance was above the median. (By definition, only 50% of people are better than the median, so at least 37% of students thought that they were doing better than they were).

If she gets one anyway, she should recognize the near-certainty that she will, in fact, spend more money (regardless of her best intentions).

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    -1. Having a credit card, even if it's locked in a drawer somewhere and not often used, can help build up credit so that when she goes to buy a house or car, she is more capable of getting a loan with favorable interest rates, and might save quite a bit on those purchases. – WBT May 16 at 19:10
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    @WBT And who, exactly, decides when it is and isn't used? – EJoshuaS - Reinstate Monica May 16 at 19:14
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    The card owner can make that decision. The card owner can set up a gatekeeper adding a human-interaction step to the unlock process, or just a simple lock, or a complex one, according to the barriers the card-holder believes she will not want to overcome when tempted to make impulse purchases. – WBT May 16 at 19:18
  • @WBT Yeah, what could possibly go wrong? The only way to completely remove the risk is if you don't have one to begin with. – EJoshuaS - Reinstate Monica May 16 at 19:22
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    "Something might go wrong" or even "things often go wrong" should not automatically mean "don't do it." Instead, it can mean "educate yourself, get support, and learn good behaviors." If we never engaged in any activity that had any degree of risk, life would cease to exist. – dwizum May 16 at 19:25
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There are various technical measures that can be used to limit spending (as the other answers explain), but they only address the symptoms. The best they'll do is prevent her from racking up a huge bill. At worst, they'll just be a set of formal hoops to jump through before racking up a huge bill. She really needs to learn why financial responsibility is critical and how to do it effectively. Otherwise, she's likely to revert to old habits once she's on her own and nobody's enforcing these restrictions any longer.

One way I've seen work for a lot of people is for her to get an accountant. I'm not necessarily talking about hiring a professional, simply a parent, sibling, or other trusted individual who makes good financial decisions themselves. On a regular basis (weekly is a good start), she would sit down with her accountant for an audit. Pull up her credit card and bank statements online and walk through the last week's activity with her. Ask about individual charges (good ones and bad ones), what they were for, and why they were needed.

She'll notice very quickly that it's much harder to justify a poor financial decision than a good one. Before long she'll start thinking about whether she can justify a purchase before she makes it and if she can do that, then she's already well on her way towards making better financial decisions.

In the beginning, the "accountant" will be doing most of the interaction, analyzing records and asking leading questions. Over time your sister would slowly take more of the lead, as she learns how to "audit" herself by observing the accountant. It may also help if the accountant goes through the same process using their own records, and compares/contrasts the two. Having a good example to follow is a powerful teaching tool.

The reason I believe this method works is because it gives the accountant plenty of opportunities to guide your sister's spending, but without any artificial barriers forcing her to use her money in a certain way. She's still free to make make her own choices. The accountability aspect forces her to think through the rationale and ramifications of purchases, first in hindsight, then eventually in real-time. Most importantly, she'll have someone she can consider a trusted financial advisor that she can consult without any fear of awkwardness or condemnation.

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    +1 to an accountant for accountability, rather than for accounting. Even just a self-imposed requirement to write down every purchase and be able to periodically reflect on where your money is going can be a deterrent to impulse buys. – WBT May 16 at 19:30
  • This is really smart. Don't limit the symptoms, cure the disease. – Redwolf Programs May 18 at 3:21
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It's good that your sister acknowledges debt to be a potential issue. It would make me worry more if she didn't, personally. As with the majority of things in life, the best way to improve something is with effective practice. The sooner she picks up good habits, the more successful she'll be at keeping them throughout her adult life.

For someone that is still learning in this age of "1-click buy", I would recommend that she not save her credit card with any online service. The total limit on the card is up to her, of course — my first card had only a $500 limit, like you said. The key here is to introduce a conscious action for every purchase. With the card not saved, it will force her to enter the information by hand each time. This could be enough of a deterrent to stop impulse buys.

Of course, she may end up just memorizing her card's information and entering it without thinking. However, since she has already expressed awareness and concern, I'm optimistic that her initial purchases will begin her down the right path. Try to develop a system with her that has her add items to her cart, then sleep on it.

Good luck. Learning to manage debt can be tricky.

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Maybe your bank has an app or online banking where you can disable features of your card. I can disable mine for cash withdrawals, purchases in stores and online purchases at any time and can also enable it again. It won't prevent her from buying something she wants to, but adds the extra step of enabling that, where she might think again if she really needs it.

Screenshot of the app

  • Can you disable cash withdrawals separately from purchases? And online separately from in-person? Or a single disable switch that turns off all of the above? – Ben Voigt May 18 at 20:16
  • @BenVoigt I can disable them separately. I added a screenshot of the app to my answer. (It is German, but you can see what it does) – andii1997 May 18 at 22:41
  • Nice! I have several cards that can be disabled through the bank app or website, but none with that level of control. – Ben Voigt May 18 at 22:54
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Get a secured credit card:

These work by putting down money (collateral), and then basically burrow from yourself. With these kinds of cards you can build your credit, and credit history. But in the event of any issues, the card is already paid off.

I normally would not recommend this for a first time credit user. However if the goal is just to build credit and learn how to be responsible with money, then it seems like a good choice.

This is one example, though there are many: https://www.wellsfargo.com/credit-cards/secured/

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could get a prepaid card, then its money she has already put on it allowing her to save up her own money before spending. it is safer to do that.

  • Prepaid debit cards are not reported to credit bureaus, and will not help the OP's sister build her credit score. – Sneftel May 17 at 11:04
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I spent the first 32 years of my life without credit.

When it came time to buy a house, I went to a loan officer and asked for advice. He told me to get whatever credit card I could, which was some joke card that costs $50 a year to have and has a $200 limit. I used it, payed it. He also said put X amount in a bank account and don't spend it for 6 months. Just leave it there. Pay off any outstanding debts you may have, like medical bills or in my wife's case some default court thing because her room mates abandoned ship without telling her and she was on a lease.

A year later we bought our house with a conventional loan at 3%.

My point is you don't need credit until you need it. Some cases are more severe, like being stranded when a car breaks down, or buying a car without a co-signer, or just plain being poor and needing to eat. I always got through it without credit until we considered buying a house. Then all it took was a year and a little planning and we were approved for all we needed at a very reasonable interest rate. We're scheduled to pay it off 10 years early even.

So all this hype about building credit, checking your credit score, maintaining some astronomically high rating... it's all BS. It's just to keep you as a consumer doing your part to maintain a healthy economy. I never stress about any of that because I don't care if my day to day credit is in the low 400's. When I need it, I will see it coming, and I will do the same things I did last time.

I wouldn't even invite the stress into your lives. Learn to laugh at what the world claims you "need" and all those impulse buys just disappear into the noise. One day she may need credit to do some standard thing like buy a car on her own, or a house, or whatever. Generally those things are not impulse buys, and if they are you either have bigger problems on your hands, or no problems in life at all. If she does see a purchase like that coming, save up as much as you can in one savings account. Don't touch it. Get a cheap, low balance credit card and play the dumb credit game for a year. Once you get your loan, you can cancel the card.

Live against the grain and spare her from a middle age filled with debt.

  • another way to build credit is to take out a small loan, don't touch the money, and just pay the interest. it can boost much more than a cc – sudo rm -rf slash May 17 at 8:21
  • Yes, that's an option too and there is no shortage of predators out there wanting to give loans to young people so they can guarantee a missed payment, skyrocket the APR and laugh as they struggle to pay it off over the next 17 years. Use the game against them though. If she's militant about her goals she can do what you suggest even though it's a pretty ridiculous structure that says effectively that you have to buy your way into the credit game. – Kai Qing May 17 at 16:37
  • In that case you could loan money to your future self with something like Self Lender. There's a flat setup fee, payments go to a CD which earns interest, early termination is 5$. You could still screw yourself and your credit with late fees if you don't pay and don't terminate though. – Fax May 18 at 11:44
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    @Fax: But definitely not Self Lender, their APR is over 15%. A ridiculous amount for you to pay to save your own money. Many credit unions offer savings-secured loans with no hard credit inquiry for between 2 and 4%. – Ben Voigt May 18 at 20:12
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If I had this problem, I would make a list. I would make a list of every purchase and its cost, and keep a running sum of how much I had racked up that month, in addition to whatever debt-carryforward I had from previous months. I'd also keep track of how much in unpaid future interest payments I had accrued.

This last point is harder to set up, but at a minimum, assume you want to pay off your card completely in one year, and calculate simple interest (not completely right, but a reasonable compromise) on your balance for six months.

If done faithfully, and with no conceptual or arithmetical mistakes, this list will give you a single number at its bottom, which will metaphorically say either green (you can spend more), yellow (caution), or red (Stop!)

This might be hard for your sister, and indeed for most people. If you or your mother could, with your sister's consent, monitor this list with her, that would help. But you shouldn't nag. You may need a nerd to help you set this up.

protected by GS - Apologise to Monica May 16 at 22:03

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