10 Important Credit Card Tips for College Students
Guest post by Baruch Silvermann @ The Smart Investor
The most important thing that you should know before you even get started is that credit cards are a loan, not free money. You’re going to be required to pay that money back and that’s why it’s so important that you don’t spend more money than you can afford.
Now, if you know how to use them properly you can get some great benefits from your credit card. You can get rewards and cash back and even improve your overall credit score. You just need to make sure you’re doing a little work and comparing things like benefits and APR before you jump in.
So, let’s get into our best tips to help you use those credit cards the right way.
1. Use Credit Cards to Build & Improve Your Credit Score
That will allow you to get even more credit in the future. But you have to make sure you’re following the right steps and that starts with paying your balance in full every month. For those who don’t have credit yet or for those who have bad credit already it’s a good idea to start with a secured credit card that will help you along.
Now, for those who are just starting to look for a job and don’t have any credit you absolutely still have options. You have the ability to open a student credit card, for example, even if you don’t have an income. You’ll need to be a student and have a parent co-signer, but these can help you immensely.
For those who aren’t attending school you can possibly get a secured card. That secured card will allow you to put a deposit into an account and then you’ll be able to spend that amount of money on the card. You actually get a review from the company in charge of the credit card and they can transfer your card to a standard credit card at a later point. So it’s like riding your bike with training wheels before you get ready.
2. Choose The Right Card For You
You should know that getting one credit card is not the same as getting another one.
For those who do most of their buying at one place, you could get a card that will give you the most rewards at that place. If you aren’t so good at paying off your debt every time you may want to look into lower interest rate cards. And so on.
3. Know What You Can Afford
“Credit card debt is very expensive, so make sure you’re able to pay your monthly bill” says Yosi Rahimi, MoneyCompass’s Founder.
It can get tempting to just keep spending on your credit card and assume that you’ll pay it off later, when you’ve graduated. Unfortunately, you can end up extremely far in debt before you get the money to pay these things off. And when 30% of your credit score will come from the amount of debt that you have. If you’re not getting that card paid off every month you’re going to have a lower credit score.
“Do you think that your student loan interest is a killer? Your credit card interest could be 5 times higher! Make sure that you can afford your monthly purchases and pay your bill in full and on time”, says Rahimi.
Instead, make sure you pay attention to how much money you can afford to put back on that credit card each month and go from there. You’ll need to keep track of how much you spend and how much you make in order to make this work. And you’ll need to follow that limit. Don’t get sucked into overspending no matter what it is you want to buy.
4. Watch the Fees
You’ll find that there are all kinds of fees associated with your credit card and you need to be aware of them. In fact, research has found that interest and fees cost Americans over $163 billion in 2016. And that’s exactly where credit card companies are starting to make more money off of you.
Annual fees could be $95 to $200 or they could be $1000 or even something higher. Luckily, you don’t have to get a credit card with these types of fees. You can get cards with no annual fees or you can get annual fees waived in some cases if you talk to the company. You just have to make sure you’re aware.
5. Don’t Look for an Easy Out
Once you get out of the house it’s up to you to take care of your own fees and your own credit cards. That means you shouldn’t be relying on your parents to do these things for you.
After all, they have their own things they need to pay for. If you do ask them for help or you do ask them for a loan you’ll want to make sure that you’re doing everything you can to come to an agreement in order to take care of things, immediately.
6. Use Balance Alerts
These limits can be set on your own or they can be set by the company themselves. The best way to go is to keep it around 30% of the total limit on the card.
7. Keep Your Credit Utilization Low
You never want to max out the amount of money your credit card offers you. Rather, you want to make sure you have a balance of less than 40% on your credit line at any specific time. If it’s not the situation – you should work on lowering your credit utilization rate.
If you have a high balance you’re also going to be paying a lot more on interest and that’s going to keep building up and up.
8. Prioritize Repaying High-Interest Debt Over Other Spendings
According to Rahimi, repaying your high-interest debt is much more important than almost anything else.
“That is easier said than done for many, but it is very important to stay on top of your finances if you carry credit card debt. Sometimes carrying credit card debt is inevitable, however, having a plan on how to repay it as fast and cheap as possible could help reduce the stress associated with carrying debt and save a lot of money in interest payments”, says Rahimi.
9. Avoid Late Payments
For those who struggle to make payments on time you can set alerts for your phone that will make sure you’re notified before it happens. You’ll also want to put something on your calendar to help you. You’ll also want to take a look at online settings to see if you can make automatic payments on your bills instead. This will keep everything from being late.
10. Don’t Get a Cash Advance
Cash advances may sound great because they give you the opportunity to take out cash, but that actually makes things worse instead of better.
“Don’t use credit cards when you can use student loans”, says Rahimi. “If you absolutely have to use debt to finance your tuition or living expenses, make sure you’ve exhausted your federal student loan options. It will be much easier to pay back these loans than repaying your credit card revolving debt.”
You want to make sure that these cash advances are avoided at all costs because they have a whole lot of fees and they have immediate interest charges when you pull the money out.
For additional tips see the full post at The Smart Investor.
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