If you are a college student, it is quite likely that you have a lot to consider and do at this point in your life. Examples include cramming for tests, building your career, extracurricular activities, and social events. As you move from one activity and/or responsibility to another, you will learn numerous life skills that will prove to be helpful as you progress further into adulthood. One area of focus should be on the steps that are necessary to build credit. During your college years, you should practice building your credit. This will aid in ensuring a positive and productive future once you graduate from college.
Most students obtain their first credit card in college. If you elect to take this step, and utilize it in a responsible way, you will find that you become an expert in managing both your credit score and your finances.
These cards offer a high level of convenience and are much safer than carrying cash on campus. They are especially beneficial for emergency situations such as having to replace a tire on your vehicle, having a vehicle towed, and even purchasing medications during an illness.
While there are several reasons why you should get a credit card as a college student, there are some facts that you should learn first. In this comprehensive guide, we will go over these facts and share everything you need to know about credit cards.
The Primary Goal
When you obtain a credit card, your primary goal should be to build your credit, not spend the available balance on the card. When you check out the advertisements on these types of cards, you will find that they broadcast promises that are highly tempting.
You should try to avoid these promises and simply focus on creating a budget and cultivating habits that are responsible such as ensuring bills are paid on time and spending only within your financial means.
You should regularly check your credit score with the issuer’s reporting tool. Utilize all tools possible to remain on top of the financial-based responsibilities that you have.
Only Get One
When it comes time to get your first credit card, you may find that you have several different card options to choose from. You should avoid indulging. Instead, only get one credit card. This should be more than enough to handle the needs that you have. If you apply for many cards within just a short amount of time, it will cause many hard inquiries to negatively impact your credit score. By just using one card, you can have an easier journey when it comes to building credit.
If you want to apply for a credit card, use the CardMatch™ Tool from Bankrate. This will do a soft credit check and will help you choose a card by providing you with a list of cards that are listed with your approval odds. Having personalized offers and preapprovals makes choosing a credit card easy without getting all of the hard credit inquiries on your credit score.
Income and/or a Cosigner
If you are a college student and you are under the age of 21, you will need to meet specific requirements in order to get approved for a credit card. First, you must prove to the issuing company that you are capable of paying the money back that you spend on the card. This may be through any income and/or assets that you have.
If you do not have an income or any assets, you will need to have a cosigner who is 21 or older. You may also request to be added as an authorized user on a loved one’s credit card so that you are able to place charges on it, but you will not be able to make any changes to the credit card account.
What is Spent Must be Repaid
When you use the credit card that you get, you have to understand that when you use the credit card, you are actually just borrowing money. Yes, you can use it to purchase things now, but you have to pay back the money at a later time – typically, month-to-month with added interest. You must make sure that you spend in a responsible manner so that you are able to – at least – make the minimum monthly payment.
Just remember, it is best to pay back your charges as quickly as possible because the longer it takes, the more money you will have to pay back in interest charges.
If you want to avoid paying extra in interest, you should pay your full balance on the credit card each month.
Pay on Time
As a credit card holder, it is important to understand that your payment history makes up approximately 35% of your total FICO score. You should always pay your credit card early or – at least – on time.
If you are worried about accidentally forgetting to pay your bill each month as the result of the mental load you are carrying each month with college coursework and other activities, you should set up automatic payments with your card.
You Will Have a Credit Limit
It is important to understand that when you get a credit card, you will have a maximum amount which is referred as your “credit limit” on the card. If you are responsible about making your payments and the amount you spend, the card issuer may – eventually – raise your limit. When you pay off your balance, the card issuer may also raise your credit limit.
Your Future
You should know that how you use the credit card that you obtain as a college student will directly impact your future. Your activity on the card is reported to at least one credit bureaus each month. There are three major bureaus out there. These track your credit history and use various figures to determine your FICO score. These scores will affect you in the future if you apply for other credit cards and/or loans. It will affect whether or not you are approved for other types of loans or credit cards. It will impact your ability to purchase a vehicle, a home, and more. It is important to keep your balances low, pay your minimum payments and not exceed your credit limits or miss a payment.
Due Dates
The due date associated with your credit card is very important. If you fail to make your payment on time, you will be subjected to additional and extremely hefty fees. The longer you wait to pay your monthly payment, the heavier the penalties.
If you are more than 30 days late, it is reported to the credit bureau. If you reach up to 60 days late on a credit card, the issuing company will increase to the maximum allowed interest rate on your card. If you reach the 180-day mark, the account will be lost and you will still – legally – be required to make your payments.
Avoid Overspending to Be Rewarded
If you obtain a credit card that gives rewards, it may be tempting to spend more on the card in order to get those rewards. You may earn cash, get travel points, gift cards, and a multitude of other items. Remember, rewards just are not worth having to get more in debt and pay higher levels of interest.
Safety Matters
There are thieves out there that will want to gain access to your credit card in order to make unauthorized purchases. In most instances, credit cards have zero fraud liability, but you must track and report this fraud to the issuer of the card in order for corrections to occur. Always keep your card safe, you should not carry it around every single place you go, and if you decide to shop online, be sure that you are shopping on private networks on trusted websites.
Responsibility Counts
When you have a credit card, it is important to keep your balance low and to make payments that are considered to be timely. If possible, make a monthly payment that is highly than the minimum monthly payment. This will allow you to build credit without accumulating a high level of debt. Additionally, you should not open too many credit card accounts at once as this could be financially devastating in the future. Simple establish responsible habits that will actually pay off as time progresses and you will build your credit in a healthy manner that will benefit you within the future.
Once you graduate from school, it will help to smooth out the path that you take. You will discover it is easier to get a job, get a place to live, get a vehicle, a cell phone, insurance, and utilities. These are all items of interest that you will need once you are out and about and starting your career. If you would like more financial advice, please contact us today: https://somervillebank.net/locations/
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