Introduction
Building credit can be a scary thing, especially for young students in college taking their first steps out of the safety nets of living at home. But the truth is it doesn’t have to be a scary thing, it’s not even really a hard thing to do.
Credit cards can be a convenient and useful financial tool for college students, providing a way to make purchases, build credit history, and even earn rewards.
However, it’s important for college students to use credit cards responsibly in order to avoid falling into debt and damaging their credit scores. In this article, we will discuss smart ways college students can use credit cards, including building credit history, managing finances, taking advantage of rewards and perks, and handling credit card debt.
But fear not! These pitfalls are easily avoided by taking a smart and realistic approach to building credit. Here are some of the most useful tips I’ve found for college students when it comes to using credit cards.
Start on your parent card
It is often a knee jerk reaction of students seeking financial independence to immediately apply for their very own credit card. While occasionally advisable this too often this results in students making exorbitant or unnecessary purchases, leaving them with debt that quickly gets over their heads.
A much easier path to take is to become an authorized user on a parent’s credit card, called “piggybacking”, which will allow you to begin building the foundations of a successful credit rating without offering the risk that complete financial independence carries.
Pay off your balance in full each month
The danger of a credit card essentially lies in the fact that there’s little to no immediacy when it comes needing to pay it off. Believe it or not a month is a significant amount of time when it comes to spending.
Even a student with no monthly bills can spend a surprising amount when left unchecked. It is due to this that paying off your credit card balance in full each month becomes important.
When any credit card holder looks at their monthly bill and thinks, “I’ll just pay the minimum and worry about the rest next month.” A dangerous cycle can begin wherein the credit card holder continues to put off payments each month until the debt becomes nearly insurmountable.
A good practice to get into is to pick a specific day where each month you’ll hop online and pay off your balance.
Stick to one card
Trust me. One credit card is enough for any student. In fact, there’s definitely an argument to be made that, unless you’re making six plus figures a year, no one has cause for holding multiple cards. As your income and credit increase so will your credit limit, allowing you to make more purchases on one card.
Picking this card can be an important step in obtaining financial independence and there are plenty of tools provided to young and old people alike that help one to pick a card that most benefits their situation and needs.
Some sites will allow visitors to easily weigh the pro and cons of various cards to more easily as well as helping them make a more informed credit card decision through their education center.
Make small, regular purchases to start
The urge to go out and break in any new credit card is great. But it’s something that honestly must be avoided in order to build good spending habits. Just because your credit limit is $200 doesn’t mean you need to go out and blow it in the first 3 days of receiving your new card.
One of the best way to build good habits is to pick one or two regular monthly purchases such as gas or groceries that you know you will be able to pay off at the end of the month. This helps build a realistic expectation of how much should be put on the card each month.
Avoid large purchases
Now when I say avoid large purchases I’m not saying you absolutely can’t buy that new Xbox One you’ve been waiting all year for or the killer leather coat you’ve been eyeing, I’m just saying don’t put it on your credit card. When making large purchases pay cash or use a debit card.
The reason for this is unless you plan on going home and paying off your balance immediately, which let’s be honest not many do, and then you leave yourself open to accidental overspending.
A $400 purchase, on the off chance as a first time cardholder your limit allows it, can seem like nothing on the 1st but come the 30th after the rest of your regular monthly spending you can easily be looking at owing more than you’re able to realistically afford. By making these purchases in cash you can more easily be certain that you’re not spending money you don’t have.
Building Credit History
For college students, having a good credit score is essential, as it can have a major effect on their financial well-being. To develop a good credit history, they can use a credit card responsibly. This can open up opportunities such as renting an apartment, buying a car, and even obtaining employment.
To make the most of a credit card, it is important to select one with suitable terms and conditions as well as always paying off the balance each month.
College students should stay within their credit limit and make payments on time, as late or missed payments can hurt their credit. Using a credit card responsibly over a period of time will help them create a positive credit history for the future.
Managing Finances
College students can benefit from using a credit card to manage their finances. By tracking their statements and purchases, they can get an idea of where their money is being directed and discover ways to reduce unnecessary spending.
Credit cards can be beneficial for budgeting and managing finances, as they enable college students to set limits and track progress. Various credit card providers also offer online tools and resources, such as budgeting apps and educational materials, that aid college students in managing money successfully.
By using a credit card as a financial management tool, college students can gain greater control over their spending and make more informed financial decisions.
Rewards and Perks
Credit cards are an excellent resource for college students to manage their finances and keep track of their expenses. College students can gain insight into their spending habits by regularly reviewing their credit card statements and recognizing areas to reduce expenses.
A credit card can be helpful for college students to manage their budgets, enabling them to set limits and stay on track with their financial objectives.
Furthermore, college students can benefit from the online tools and resources that come with many credit cards, including budgeting apps and financial education materials, to better manage their finances.
College students can benefit from using a credit card for more effective financial management, allowing them to have better control over their spending and make wiser choices.
Handling Credit Card Debt
College students should practice responsible card usage, but it is also important to have a plan ready in case they cannot pay their credit card bills.
College students can use a few strategies for managing credit card debt in a positive manner:
- You can save on interest charges and make debt repayment easier by transferring balances to a credit card with a lower interest rate.
- Working out a payment plan with the credit card company may be beneficial for college students, providing them with the opportunity to make smaller payments over an extended period.
- Credit card companies sometimes offer programs specifically designed to help college students manage their debt, like consolidation loans or balance transfers.
It’s also important for college students to be proactive in seeking help if they are struggling with credit card debt. Financial advisors, credit counseling services, and other resources can provide valuable assistance and support in finding a solution to credit card debt.
College students can attain financial stability again when they are pro-active and ask for assistance with tackling their credit card debt.
Conclusion
In conclusion, college students can benefit from using credit cards for purchases, developing credit history and earning rewards. However, caution should be taken in order to avoid incurring debt and damaging their credit score.
This article offers key advice to college students, such as selecting the right credit card, using it responsibly, and managing finances properly – to ensure they benefit from credit card usage while avoiding any potential risks.
Establishing a solid credit history by using credit cards sensibly is essential for college students to have a prosperous future.