Use Your Student Credit Card Responsibly
Credit card use among college students has fallen in recent years, reflecting both the tougher credit requirements of issuers and student caution when using this convenient, but sometimes dangerous way of paying for expenses.
Still, some 70 percent of undergrad students and 96 percent of grad students have credit cards according to Time. The problem isn’t that they possess these cards, rather students generally do not pay off their balances each month, thus incurring sizable interest charges. Indeed, fewer than 10 percent pay off their balances each month, with the rest racking up increasingly larger bills month after month.
You can, however, carry a student credit card and use it responsibly. The following tips can help you take advantage of your credit card without it taking advantage of you:
1. Pay off balances monthly — If you don’t pay off your credit card balances monthly, then you will incur an interest charge. It is as simple as that.
Make a point to pay off your balances to avoid charges that are difficult to pay down if you roll over balances from month to month. Familiarize yourself with your credit card statement — learn what interest rates are charged for general purchases and cash advances. Use the former; avoid the latter.
2. Use your card wisely — A credit card may seem like “easy money” and, therefore, can tempt you to use it for the wrong reasons. Why do you have a credit card? Is it for convenience for for something else?
Determine what uses your credit card will serve and stick with it. It can cover books, gas for your car and for real emergencies such as a medical visit or a car repair. Don’t use a credit card for entertainment, to buy clothes or for anything else where cash can do.
3. Avoid paying fees — Your credit card is convenient, but it also comes with several fees — most if not all can be avoided. If you’re being charged an annual fee for your credit card, then you’re in the minority. Ask your card issuer to drop the fee.
People with bad credit may also pay other fees including an application fee, a maintenance fee and pay higher interest rates for the privilege of having a small credit line. If you can’t get these fees dismissed, cancel your card — it isn’t worth paying all that money for the privilege of credit access.
4. Consider a co-signed card — Some students need credit, but either have bad credit or don’t want to be sacked with bills every month. This is where mom and dad can come in.
With a co-signed card, your parents share the responsibility of you paying the card. You can have statements sent to your parents who will make payments for you each month. This means that you’ll be under their watchful eye, so don’t misuse your card or you might receive a phone call from home asking you to explain your purchase.
5. Get a secured card — For some students, a credit card is a real danger. Period. However, having no access to credit may present an even bigger problem.
A secured credit card is back by a prepaid deposit. For instance, if you have a $500 credit line, then you have already contributed $500 to your account. Essentially, you’re your own lender and you cannot borrow more than what is in your account.
Consider a debit card, one that is connected to your checking account if you need access to plastic. Just track your debits carefully to avoid overdrawing your account, while enjoying the same convenience of a MasterCard or Visa.
Finally, a prepaid credit card may work out best for some students. With this arrangement, you simply pick up a card at a convenience store and obtain the balance that you want with your money. For instance, you can plunk down $300 and carry a card with a credit card logo that can be used wherever credit cards are accepted. When the card balance runs low you can replenish it or simply let it go to a zero balance and then discard it. Be mindful that there are fees charged with this option.