Once you enter college, you will probably already start receiving credit card offers and ads, and most likely you'll be pretty clueless as to which card is right for you. Here, I'll explain the very basics that everyone who is going to use a credit card for the first time should know. I've also put together a selection of our best rated student credit cards for college students, all of them are no-fee cards.
Understand your credit card. Before applying for a credit card, it is important to understand what a credit card is, who it's issued by, and how it works. For starters, every step that you take with your credit card will help build your credit score for the better or for the worse. When you get your first credit card, you have no credit history yet, and depending on your spending habits, you can build a great credit score or a lousy one. A credit score is extremely important for day-to-day life. It can help you get a home loan, pay less interest rate, get discounts on car insurance, and it can even help you get a better job.
Who is behind credit cards? Credit card companies, banks, and credit unions issue credit cards to eligible individuals. A line of credit is more flexible than a loan since you don't borrow a huge amount of money at a specific moment and then repay it in installments. Rather, you're given a maximum amount of credit that you may borrow (this amount varies from user to user), and you adhere to the issuer's terms of repayment. Generally, there is a specific amount of interest-free time, during which you can repay your credit. Usually this time period is around 1 month. After that period ends, you will have to start paying interest on your balance.
What does APR mean? It is a good idea to pay your balance in full before the grace period ends. However, if this isn't possible, then you must make sure to pay at least the minimum required amount, which is a percentage of the balance. You will have to pay interest on the remaining balance that you roll over to the next month if you only pay the minimum amount. The higher your Annual Percentage Rate (APR), the more you'll have to pay each time you carry a balance! When looking at the fine print of a credit card, try to get a card that has a low balance transfer and purchase APR, or a 0% introductory APR period.
Don't overspend. As soon as you receive your first credit card, you can already use it to purchase. You can shop at a store, online, or over the phone, but make sure that you don't exceed your credit limit! Don't spend more than you need. It's easy to start overspending once you have your first card, and it's always a bad idea. To help you manage your spending smartly, make sure to keep a record of all your purchases and only use the amount of credit that you can afford to pay off each month in full to avoid falling into long-term debt.
Pay your bills on time, every time! This is one of the most important pieces of advice that I can give you. If you teach yourself good spending habits from the start, it will be much easier to keep them over time. Your full spending behavior is tracked by your issuer and it is given to the major credit bureaus (Equifax, Experian, & TransUnion). The credit bureaus use this information to create your credit reports, and in turn, your credit reports will help define your credit score. When you apply for a loan, or even for a job, companies may request your credit score. A high score will open many doors in life, whereas a low score is a major setback.
What to look for in a credit card. The main things to check for on a credit card include the annual fee (I wouldn't recommend getting any card that has an annual fee), the balance transfer APR, the purchase APR (shoot for a card with 0% intro APR for both purchases and balance transfers, or a low on-going APR), rewards, and benefits (such as cash back, points, perks and extras). Some cards also offer bonus points or bonus cash back to new members - however, you generally need a good to excellent credit score in order to be eligible, and many of these cards have annual fees or high APRs.
Here are some of our best rated student cards with no annual fee that offer rewards and perks on your spending: