Getting a first credit card is an important milestone because when students use their new cards responsibly, they’re building credit and learning to manage their finances. Here are some credit card management tips for new college students who are using credit cards for the first time.
Don’t Charge More Than You Can Pay Within a Month
As with all credit card holders, students shouldn’t charge higher amounts than they can pay off by their next billing cycle. Leaving a balance on a card from one month to the next can get expensive because interest adds up and it’s easy to let it get out of hand. Additionally, it puts students at risk of negatively affecting their credit score if the balance grows beyond a certain percentage of their allowed credit or possibly incurring fees if their balance goes over the limit.
Don’t Spend Money Just to Get Rewards
Parents and schools sometimes offer students rewards for excelling at academics or other activities. So when students see the word “rewards” used in relation to credit card spending, they may get the idea that spending enough to qualify for a reward is like earning a prize for an achievement. Students need to be aware that credit card rewards are promotions a company uses to persuade customers to take on debt. They should never spend money just to get a reward. Of course, it’s fine to enjoy the rewards if you happen to qualify for them, but collecting rewards points shouldn’t be the goal of using a credit card. If the reward is something a student needs, she’s better off buying that item directly.
Avoid Using Cash Advances
Cash advances are another aspect of credit card management that can easily confuse new credit card holders. Credit card companies tout the convenience of getting an advance, and the advertising hype doesn’t always make clear that these advances are much more expensive than charging purchases to a card. CNN explains that cash advances can come with interest rates up to 30 percent. Plus, cash advances usually start accruing interest immediately, whereas for ordinary purchases the card holder generally has a few weeks before any interest is charged. Since the costs are so high, students shouldn’t take cash advances except in emergencies. Ideally, a student should set up an emergency fund or arrange to borrow from her parents in an emergency so that she never has to use a cash advance.
Monitor Your Account for Theft
When starting to use credit cards, students should make a habit of reading credit card statements to check that the expenditures listed reflect purchases they made themselves. If their account information is stolen, students need to contact the credit card company right away to dispute the unauthorized charges and to get a new card. Besides monitoring statements, students need to make sure their physical card is always in their possession. For example, they shouldn’t leave a card in a shared dorm room where other students might find it.
Students should keep these tips in mind as they start using credit cards. When students develop responsible credit card habits in college, they’re on the right track to manage their finances well throughout adulthood.
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