For students going to college for the first time, you may be inundated with college student credit card offers. Take the time to learn the responsibilities of building credit. Using a credit card in college wisely will help you later in life make larger purchases such as a home. Follow these important tips and educate yourself on how credit works and how to use it wisely.
HAVING A GOOD CREDIT SCORE
A credit card with a large balance and you making on-time payments might sound like a good way to build credit, but your FICO score will actually reflect you as a credit risk. If you max out your credit card and can’t pay it off you become a liability. Your interest rate on other purchases such as a car could get affected by this.
It is best to keep as much open credit as you can on your card. Use the card on purchases that can be payed off quickly. When you are just beginning to build a credit history its best to keep a “zero” balance each month. This will help you build your credit score and avoid paying higher interest.
- REWARD CARDS: If you know that you are responsible about paying your bills every month, perhaps you should consider a reward card. By using a reward card for monthly expenses and paying it off each month, you can increase your rewards for things such as flight miles – great if you have to go home to visit – or cash back offers. Find the reward that meets your needs best.
- INTEREST RATES: This is something that you must pay careful attention to. If you realize you are unable to pay your balance, or use your card for an emergency such as a car repair, you don’t want to discover too late that the interest eats up your payments. Some cards offer 0% for an introductory period, while others offer a low rate. Find the best college credit card with low interest and long term offer so you won’t have any surprises later.
- DEBIT CARDS: Debit cards will offer the same conveniences of a standard credit card. With these, the money is automatically deducted from your checking account. The only drawbacks to a debit card is the fact that is does not help with establishing your credit score. If your card is stolen, the thief will have immediate access to your funds. While there may be no liability, it can be a huge inconvenience while the report is investigated.
ASK YOUR CREDIT CARD COMPANY TO NEGOTIATE
There’s fierce competition between credit card companies. Once you complete your student credit card application and get approved, contact your credit card company and ask them to lower the rate. If you make on-time payments they will likely negotiate with you. Communication will keep you in good terms with your company – they count on making money from you, so make them work to keep you as a customer.
When you get approved for a credit card remember to be responsible. Understand the risks associated with getting too much credit, keep your credit card spending under control, and use your card to your advantage.
Don’t rely on your credit card as a source of income. Use the card wisely. Being a student has a lot of expenses associated with it, so it’s best to keep your available balance open for emergencies. Try not to use it for a night on the town, since that money isn’t free. Learning good spending habits during college makes the learning process more complete. Financial responsibility may be the most important thing you learn during the college years.