Tips to Students with Credit Cards

Today’s content is a guest post from Jennifer Irocky, a student blogger for Chegg.com. While it’s not specifically about International Students, the content (and lessons) are applicable to all students.  Enjoy!

Ah, students and credit cards; worst nightmare to parents, best thing since sliced bread for students. Having a credit card is having money dangle from the finger tips; however, we students must be careful. Sometimes credit cards can do more harm than good. So to help balance out the good and evil of student credit cards here is some guidance.

Depending on how a student uses a credit card, it can be extremely helpful or extremely harmful. The number one purpose of a credit card for students is to start building good credit.

Credit cards – making students smile since the dawn of time.

Having a credit card is one way (and one of the best ways) to start building a credit score foundation. Having a credit score then helps in getting a job, loan, car, house, and many other items. However, if a credit card is used incorrectly, the damage could be catastrophic.

Let’s picture a credit card scenario, a credit card with a  $300 limit and at 19.9% interest rate (the rate is often more than that), with the user only paying the minimum balance every month.

In this situation debt could easily rise. It’s almost another $60 for the first month just in interest; that number could build and build over time if the balance is not paid off quickly, and in full. It can take a short time to accumulate debt, and a long time to pay it off.

“The way most people get in trouble with credit cards is not that they buy so much. It’s what happens when the interest starts compounding”, wrote Allie Johnson, author of 10 Credit Commandments for Young Professionals.

Often there is no annual fee and sometimes no interest for the first 6 months to a year, but don’t let that trick you. It’s important to keep track of the balance, interest, and the specifics stated in the contract.

Credit cards are good for emergencies.  Buying a new dress for a hot date does not constitute an emergency; however, needing sudden car repairs or to pay for towing does. Credit cards can be part of a financial safety net, but should not be used for non-important purchases or as the only means of financial safety.

Contrary to belief, simply having the card sit in your wallet does not magically build credit. In order to build a credit score, the card needs to be used. My recommendation is to use it at least once a month on purchases you would have bought anyways, such as school books or food.

The number one commandment of having a credit card and the best way to build up a credit score is to ALWAYS pay off the full balance BEFORE the due date.

Any ideas on how this card fits in his wallet?

There are several student credit cards to start with. Companies such as Discover Card, or Visa often give good deals and low rates for students. Student Credit Cards.Comgives a list of some available student credit cards, and compares companies to each other.

I recommend keeping the card for a least a year or two before canceling (the longer the better), and then moving to a more advanced system with a higher spending limit.

Having two credit cards is the rule of thumb. One may be better than zero, but three may spread money too thin, and be difficult to keep track of.

If students treat credit cards like cash in their pocket, they shouldn’t find themselves in debt. The number one spending commandment to remember is: only spend the amount of money you have. Want something? Wait till you can afford it.

How do you feeling about students having credit cards? Are students able to build a good credit history, or are they more likely to build debt?

2 Responses to Tips to Students with Credit Cards

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