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By Taylor Tepper
September 2, 2015
Huntstock—Getty Images

Millennials have endured a few financial difficulties that were not their doing, with many graduating into the worst financial crisis in decades just as the soaring cost of acquiring a college degree put a squeeze on their early earnings.

But when it comes to credit cards, many in Gen Y are making unforced errors that could cost them serious money for years to come, according a recent report from NerdWallet.

What is Gen Y doing wrong? Let us count the problems.

1. They are forgoing credit cards altogether.

First and foremost, a large swath of those aged 18 to 34 — almost one-third — have never even applied for a card.

The length of your credit history makes up 15% of your credit score — which demonstrates your ability to handle loans and affects your borrowing costs — so forgoing credit now will mean lower scores and higher borrowing costs later into adulthood. (How important is your credit score? A 37-year-old woman living in Utah will spend about $343,500 servicing the debt on her house, car and credit cards if she has a fair score, between 620 and 679 — but a good score of 680 to 739 would save her $18,000.)

A lower credit score will also make it harder in the here and now for you to rent an apartment without the help of mom and dad.

2. They’re applying for credit when they shouldn’t be.

It turns out that those millennials who are applying are also precisely the ones who shouldn’t be.

Millennials with low credit scores — below 579 — apply more frequently than millennials at large, and are unsurprisingly approved less frequently. But that creates a vicious circle: Since your credit score takes a slight dip every time a financial institution checks your score to evaluate your application — it’s called a “hard” credit inquiry — millennials with poor scores are diminishing their chances of approval with every misplaced application.

“They have no idea what they’re doing,” says NerdWallet credit card expert Sean McQuay.

3. They’re not choosing the right cards.

Here’s the third problem: Young adults aren’t treating the choice of a card as a serious piece of business. In fact, almost half of the millennials who actually have applied for a card did so because of an advertisement or promotion.

While taking advantage of a lucrative limited-time offer can be a viable strategy among plastic mavens, new borrowers are better off selecting a card because of its core features — a low APR, solid rewards rate, and a dearth of penalties. Credit card ninjas know, for instance, that cards offering a high number of rewards points may ultimately be less valuable than they appear, since not all points have the same value. It pays to know what you’re getting into.

So what can millennials do better?

If nothing else, they should have one credit card in their wallet — using it judiciously and paying it off each month to avoid fees and penalties.

You should also be strategic about your card choice, applying for a card that matches your creditworthiness. If you’ve never owned a piece of plastic before, don’t go for a card that offers high rewards rates and requires excellent credit.

Instead, sign up for a card designed for people like you. One option is MONEY Best Credit Card winner Northwest FCU FirstCard. There’s no annual fee, a low fixed rate APR of 10%, and a credit limit of $1,000, so you can’t get into too much trouble. (To improve your credit score, try not to put more than $200-$300 on the card a month.) You can become a member with a $10 donation to the Financial Awareness Network.

Once you’ve established a history of paying your bills on time, you’ll have a chance to go after a more sophisticated card. To see some of MONEY’s top picks, check out its special report on the Best Credit Cards.

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