Students have a lot to juggle, from classes to social activities and all the expenses that come in between. A great way to manage these expenses is to use a credit card. When used correctly, students can start early to set the stage for a fulfilling financial future. Not all credit cards are the same, and some may suit your personal spending better than others. However, keeping a few basic tips in mind when managing your finances with your first credit card as a college student can quickly put you on the right track.
5 tips for students using credit cards
1. One card is enough
Once you reach the age required to apply for a credit card, you will have many options, but one card should be enough for your needs. Applying for multiple cards in a short period of time and substantiating credit applications can affect your credit score. Limiting your credit card usage to just one card can make it easier to manage your credit buildup on a busy schedule. You can narrow down the cards you have the best chance of being approved for without a credit check by using Bankrate’s CardMatch™ tool.
2. Only spend what you can repay
Remember that the credit limit your issuer sets for your card is borrowed money. Whatever you spend, you will have to pay it back. Plan to pay your credit card bill in full each month by the payment due date to avoid additional interest charges. The best way to make sure you pay your bill and avoid interest is to only spend what you know you can pay back at the end of the billing cycle. You can also pay the minimum amount due, but be aware that you may have to pay additional interest, and these additional costs can add up quickly.
3. Always pay on time
It’s important to know how payment history affects your credit score. No matter how busy your schedule is, make paying your credit card bill a priority. Payment history represents 35% of your final score in the FICO credit score model. Since payment history is such a large part of your score, it’s essential that you always make your credit card payments on time and strive to pay your bill in full each month to avoid additional interest. .
4. Build Your Credit First, Earn Rewards Later
You won’t be able to access some of the best credit cards later without building up good credit now. If you’re in college and getting your first credit card, your main goal should be to build your credit history and a good credit score with responsible habits. Rewards and perks are a great benefit of using credit cards, but they can quickly become distracting. Aim to get a card that offers tools and incentives that focus on building credit like payment reminders, credit score trackers, or credit limit increases after demonstrating good credit habits.
5. When in doubt, choose a student card
As a student, you benefit from a valuable asset in the credit card market: the student credit card. Student credit cards are designed for students and many offer benefits tailored to student needs. The best student credit cards typically have lower fees, better APRs than credit cards with no credit history, and an option to upgrade to a non-student version after school.
The bottom line
Suppose you use this financial tool well throughout your college career. In that case, a credit card can help you build a good credit history and score fast while reaching some of your biggest financial milestones faster and easier. With good credit comes consistent good habits, so always pay your bills on time, don’t bite off more than you can chew, start slow but stay consistent, and always focus on what matters most to your financial future.