It is important to develop good credit card habits from a young age in order to start building a good credit history. If you are a college student who is applying for your first student credit card, it is critical to have some basic personal finance knowledge. I know it can be overwhelming to manage your own finances, but with these four tips you will be off to a good start.
In the first place, due to the 2009 CARD Act (Credit Card Accountability, Responsibility and Disclosure Act), in order for people under 21 who apply for credit to be approved, they have to prove that they are able to pay, or have a co-signer. This means that 21-year-old college students are likely receiving their first credit card offers.
Credit cards are not free money; it is essentially a loan that allows you to make purchases now but must be paid back later. It is important not to overspend if you do not have enough money to pay it back later in full. If credit is not used responsibly it will have a negative impact on your credit score - and credit scores affect your insurance rates, your home loan, and even your job opportunities.
On the flip side, credit cards are very convenient, and if you use them wisely, you can earn credit card rewards, build your credit score and even get cash back. Before applying for a credit card, it's important to compare different cards to see which ones have the lowest APR (annual percentage rate) and the best benefits.
Here are four tips to help you manage your credit cards responsibly:
1. Choose the right credit card. Compare different credit cards and look for terms like: APR (this is the annual percentage rate), annual fee, fees, and credit limit. Some credit cards offer cash back and other rewards on your purchases. Each card has its own benefits and policies, so don't be afraid to shop around and compare different cards.
Here's my selection of some of the best credit cards for students:
Citi ThankYou® Preferred Card for College Students, a partner card, is a great student card if you are looking to earn rewards on your spending. You earn 2x points on eating out and entertainment purchases, and 1x point for all other purchases. You can earn 2,500 bonus points after you spend $500 in purchases within 3 months of account opening. One of the main benefits of this card is that you get 0% intro APR on purchases for 7 months. After that, there is a 15.99% - 25.99%* variable APR on purchases. This card has no annual fee.
Click here for our complete review of Citi ThankYou® Preferred Card for College Students.
2. Do not charge more than you can pay. This is an essential step for successful credit management. Never, under any circumstance charge more money than what you can pay for in full when the bill arrives. Paying your bills on time is the cornerstone of correct money management and will help you build your credit score.
3. Think ahead. When you think about credit, you have to think about the future. It is something that you will have throughout your whole life, and any decisions you make now will have an impact on your future. Think long term and use your credit responsibly, a good credit history will play a bigger role in your life than you expect. A good credit score will be a huge advantage in your life and can even determine if you land a job or not.
4. Protect your card. Do not let anyone use your card, because in the end you will be the only one held responsible for payment. Make sure to keep it out of sight, and do not leave it lying around when you are on campus. Most identity thefts are committed by someone close to the victim. To avoid this from happening to you, be cautious and keep your card safe at all times.
Check out our selection of the best student credit cards to find the card that suits you best.