College is when many young adults start managing their own money, including credit cards, for the first time. Whether a parent sets you up as an authorized user on their card or you apply for a student credit card, there’s much to learn about these essential financial tools.
Here are six essential credit card tips that every college student should understand.
1. Responsible Credit Card Use Comes With Benefits.
Having a credit card comes with lots of conveniences and financial advantages, including:
- Building credit scores. When you make credit card payments on time, you create a positive credit history, building your credit score. That can be helpful when you’re ready to rent an apartment, get a loan or buy a car. Plus, auto and home insurers in most states charge lower premiums when you have good credit.
- Paying for unexpected expenses. Credit cards allow you to cover unforeseen costs, whether an emergency car repair or a last-minute plane ticket. However, having enough cash in your emergency fund is the best preparation for financial surprises.
- Earning rewards. Many cards offer rewards, such as cashback, travel points or promotions and discounts with their retail partners.
2. Know How To Qualify For A Student Credit Card.
To qualify for a credit card as a college student, you must be at least 18 years old, have a Social Security number and have an income. That means you must have documentation of employment or self-employment before submitting your application.
If you don’t have any or enough income, a card issuer may require you to have a qualified cosigner. Another option is becoming an authorized user on someone else’s card. That would allow you to have a card in your name without being responsible for making payments.
3. Kickstart Your Credit With A Secured Credit Card.
In addition to your income, card issuers evaluate your credit when you apply. If you have no or little credit history, there are some straightforward ways to build it.
For instance, you can apply for a secured credit card, which requires an upfront refundable deposit that becomes your credit limit. If the card reports payments to the credit bureaus, such as Equifax, Experian and TransUnion, it’s an excellent way to build credit.
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4. Abusing A Credit Card Hurts Your Finances.
While credit cards offer many benefits when you use them wisely, abusing a card by accumulating too much debt can damage your finances. If you can’t pay off a card’s balance in full each month, the accrued interest can be significant, making it even more challenging to get out of debt.
Missing even one card payment hurts your credit scores, which has long-term consequences. Late payments remain in your credit reports for seven years, even if you close an account.
So, be sure to only use a card for purchases you can afford to repay. When you pay a card’s entire balance, you avoid all interest charges and still get card rewards, benefits and the ability to build credit
5. Avoid Credit Card Cash Advances.
Credit cards allow you to withdraw cash, which gets added to your debt balance. However, they typically come with a higher interest rate than card purchases and may charge a fee. For instance, you might have to pay 5% of the advance or a flat fee.
Additionally, most cards don’t award points, miles or cash back for cash advances. Given the higher costs and lack of rewards, only take cash advances in a dire emergency.
6. Shop For The Best Student Credit Card.
When shopping and comparing student credit cards, consider the following:
- Annual fees
- Interest rates or APRs
- Rewards
- Perks for students
- Sign-up bonuses
Look for a card with no or a low annual fee, a low APR and rewards and bonuses you can use now and after graduation.
About the Author
Laura Adams is a personal finance and small business expert, award-winning author, media spokesperson, PR and marketing consultant, content creator, and host of the top-rated Money Girl podcast since 2008. Her mission is to empower consumers to live healthy and rich lives by making the most of what they have, planning for the future, and making smart financial decisions every day. Laura received an MBA from the University of Florida. She and her husband live in Vero Beach, Florida.
