Tips for College Students Using Credit Cards

College students have a lot on their plates, including classes, extracurricular activities, and career development. You pick up important life lessons for adulthood along the way. Learning how to effectively build credit is one useful skill. You would be better equipped for life after college if you practiced credit building while still a college student.

Your first credit card in college can teach you money management skills if used sensibly. To start down the path to a sound financial future, take a look at these seven credit card suggestions for college students:

1. Recognize that earning credit is your main goal

Credit cards come with a lot of shiny ads and alluring promises, but the main goal of your first card is to establish credit.

Use this time to create a budget and develop responsible habits such as staying within your means and paying your bills on time. Experian, one of the credit bureaus, or the credit reporting tool offered by your card issuer can both provide you with a free credit score check. You already have a busy life as a college student, so make the most of the resources available to you to manage your finances.

2. Select the items you want to use your card for

Deciding what to buy and how to pay for it are both important aspects of creating a budget.

Remember that the credit limit on your first credit card will probably be low, maybe as low as $200. Consider designating the card for specific monthly expenses or purchases, like the following, to give yourself practice using the card and paying it back each month:

• Streaming services
• Bus or public transit passes
• Gym membership
• Monthly prescription refill
• Campus dining card reloads

You might also think about limiting the use of your student credit card to purchases made in those categories if it offers rewards for things like dining or gas station purchases.

Just be careful that you don’t go over your limit with the bills or purchases you choose to charge to your card. Remember that 30% of your FICO score is determined by your credit utilization or the ratio of available credit to actual credit usage. Experts advise consuming no more than 30% of your total energy. To maintain a low credit utilization rate, if your credit limit is only $200, you can either stop spending or pay off your balance as soon as you reach $60.

3. Remain faithful to a single card

You may be able to apply for multiple credit cards once you reach the legal age of majority. However, one card should be sufficient to cover all of your expenses while you’re in college.

4. Spend only what you can afford to repay

Keep in mind that your credit limit represents your maximum spending limit; it does not always correspond to what you should spend.

You will be responsible for repaying whatever you spend, and if you are unable to do so quickly, interest will be charged to you, increasing the amount you owe. Since many college students have limited funds, they should purchase only items that they can afford to pay for in full each month to avoid incurring interest.

If at all possible, try to break the habit of only making the minimum payment. Making only the minimum payments increases your risk of accruing interest, which makes debt relief more difficult.

5. Consistently make payments on schedule

Your payment history accounts for thirty-five percent of your FICO score, making it the most important credit-scoring factor. You must always pay off your credit card debt on time because of this.

Make it a priority to pay your credit card bill by the due date, regardless of how busy you get with classes or social events. Paying bills automatically can lighten your mental burden.

Make the bare minimum payment if you are unable to pay the entire amount due to preserve your credit. Just be aware that interest will be charged on the outstanding amount.

6. Establish credit first, get incentives later

Benefits from student credit cards may include minimal or no fees, sign-up bonuses, and incentives for regular college expenses like gas and groceries. However, bear in mind that rewards will become worthless for any outstanding credit card debt. Prioritize responsible use and timely, full payment before maximizing rewards.

7. Choose a student card as your first card if you’re unsure.

A student credit card is a valuable resource available to you in the credit card market. These cards are made with students in mind and provide benefits that are tailored to meet your needs.

The best student credit cards typically offer an option to upgrade to a non-student version of the card after graduation, as well as lower fees and better annual percentage rates (APRs) than credit cards for non-student borrowers with no credit history.

Conclusion

Early use of a credit card can help you establish a solid credit history and score, which will make it easier and faster for you to reach future financial milestones like home ownership. Positive habits that are persistent lead to good credit. When using your first credit card, try to be responsible with how you spend your money, pay your bills on time, and accumulate rewards. In a few years, you might be applying for your next credit card.