5 Credit Card Tips for Immigrants / First Generation Americans

I signed up for my first credit card in high school (right when I turned 18), 3 years after immigrating to the USA for better opportunities. I was so excited because it was one of those “cool” credit cards that allowed me to customize the front of the card with whatever picture I wanted. When my card came in the mail, it had the beautiful purple beach photo I picked out (purple being my favorite color obvs). I didn’t know nor cared that it had a 29% interest rate, what’s an interest rate any way? And when I saw that I got approved for a $500 credit limit, I went to the mall and bought $470 worth of clothes in one day. I ended up having a balance on that card for years, paying only the minimum payment every single month. My parents, immigrants themselves didn’t have money talks with me, they were also still learning the ins and outs of the American financial system. Needles to say, it is important to be aware of cultural differences and common practices regarding credit cards when coming from other countries. In some cultures, credit card usage may be less common, and people may rely more on cash, family loans or debit cards. However, in the USA, responsible credit card use can be a valuable tool for building financial stability and accessing credit-related benefits.

1. Understand the US Credit System:

   • Familiarize yourself with the US credit system, which is different from many other countries. In the USA, building a good credit history is crucial. Pay your credit card bills on time, keep your credit utilization low, and avoid late payments to establish a positive credit history.

   • Credit Scores: you will hear a lot of people talking about their credit scores, and whether they have a ‘good’, ‘average’, or ‘bad’ credit score. Credit card companies will pull your credit history/ credit scores when you input your SSN/ TIN # on a credit card application to determine if you are “credit worthy” for a credit card. More info on credit scores/ credit histories here:

2. Choose the Right Credit Card:

   • Research and select a credit card that aligns with your financial goals, your current credit profile (don’t apply for an AMEX Platinum if you have zero credit history, you’ll not only get “dinged” on your credit report (which decreases your credit score) for the inquiry, but you’ll also feel crappy as they will likely reject your application), and spending habits/lifestyle (if you never travel, don’t bother applying for high-fee ‘sexy’ travel cards). Consider factors like rewards, annual fees, and interest rates. Many credit cards in the USA offer cashback, travel rewards, or other perks that can benefit you.

3. Build Credit Responsibly:

   • Use your credit card regularly but responsibly. Make small purchases and pay off the balance in full each month (or even more than once a month) to avoid interest charges. Building a positive credit history will open doors to better credit card offers and lower interest rates.

   • Automate! Automate! Automate your credit card payments! Set it and forget it. I am also a control freak, I tried to manually (& painfully) pay my credit cards in my early twenties and guess what? I ALWAYS missed some payments, which led to a ton of late fees and high interest… SMH.

4. Be Cautious with Credit Limits:

   • Be mindful of your credit limit and avoid maxing out your card. Keeping your credit utilization (the percentage of your credit limit you use) below 30% is generally recommended to maintain a healthy credit score. High credit utilization can negatively impact your credit rating.

   • If you just moved to the US: since you likely wont have credit history yet, you will need to apply for a secured credit card. A secured credit card is backed by a cash deposit and is a great way to build credit worthiness. I will get in depth about secured credit cards on a future blog post.

   • Another option is to become an authorized user in one of your family members’ or close friends. I was lucky enough to have a good friend add me as an authorized user on their card, and this helped my credit increase through time as they had a high credit limit, and older credit history. Warning: this will require a lot of trust between the two of you!

5. Monitor Your Credit:

   • Regularly check your credit report to ensure accuracy and detect any potential issues. You can obtain one free credit report annually from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Monitoring your credit helps you spot errors and unauthorized activity.

   • I invest $25/month for myfico.com as I find it is the most convenient- I can see all 3 bureaus’ credit scores, a quarterly credit report, and even breakdown of different scores (Auto, Mortgage, Credit Card etc). CreditKarma is another popular & free service, however it uses the VantageScore 3.0 credit scoring system which is not what a lot of lenders use to pull your credit score.

Remember that while credit cards can offer advantages such as building credit and earning rewards, they should be used wisely to avoid debt. Developing good financial habits and understanding the US credit system are key to maximizing the benefits of credit cards as an immigrant or first gen in the USA.