This is the first opportunity you have to establish credit, and if you abuse it now, it will follow you for years to come.
Going to college is, for most students, the first time they’ll feel really independent. And, accordingly, the rest of the world starts treating them like adults too, from the expectations of college professors to the credit card offers that will start flooding in. And just as it’s important to study hard for a major, it’s essential to learn what are the real benefits and repercussions of having a credit card.
Bad credit can affect everything from your ability to get a cell phone, buy a car, rent an apartment, or purchase a house to your chances for getting a job — more employers are now checking the credit history of potential employees before hiring.
To get off to a good start with your credit card, here are five tips to learn — life will test you on them later.
1. Don’t take the first offer you get. Offers will come to your mailbox, appear at stores where you shop and there might even be people from the credit card company on campus, offering cards to passersby. It’s smart to collect as much information as you can about different cards, and then make comparisons. Don’t apply for a lot of cards, as simply applying can in itself hurt your credit, if you do it too many times.
2. Don’t treat it as income. A credit card is not free money, though it sometimes feels like it. Remember that a credit card comes with interest, so if you don’t use it responsibly, you’ll be paying for what you buy — and then some. Credit cards can definitely be convenient, but remember that you should only spend money that you’re guaranteed to have coming in.
3. Remember that there’s no such thing as a free lunch. Those enticing benefits of credit cards — the airline miles, the shopping rewards, the cash-back offers — they aren’t always what they appear to be. It might sound like they’re just a great free benefit of having and using a card, but the true cost of those programs show up in things like annual fees and interest rates. You may be paying for it, one way or another.
4. Be a micro-manager. Having a credit card is a big responsibility, and you need to be active in monitoring your use of it. Keep track of payment due dates — mark it on your calendar, set up an alert on your phone or computer, or enroll in an automatic payment option. If you’re late in making a payment, you might not only have to pay a late fee, but your interest rate will likely skyrocket, making it more difficult to pay off your balance. You should also keep track of your credit score and overall credit health. You can get a free credit report once a year from Equifax, but it’s a good idea to check more than once, so that you know exactly where you stand.
5. Pay attention to the news. Credit card industry changes have a direct effect on you and your card. Recently, Congress passed and President Obama signed into law the Credit CARD Act, which changed the rules of how credit card companies interact with their customers. Not only do they have to limit their marketing efforts on college campuses, but they must also give card holders more advance notice of changes in terms, among other things. Keeping up on the news will help in your financial life, but it’s also a great benefit for your academic life.
When you use a credit card properly, it can be a convenient method of payment, and it can help you to establish your credit history. If you follow these steps, you’ll be starting your financial independence on the right foot. To find out more about credit monitoring and the power of your credit, check out our credit guide “Your Credit Sucks”. And then make sure yours doesn’t.
– Article Courtesy of ARAcontent
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{ 17 comments… read them below or add one }
I remember when I started college, I swear the first day of class there were cc companies lined up in front of the frat houses and the lines were insane. Each claimed to have the best rate or best deals on checking, savings, etc. I remember how enticing it was to sign up because the cc companies offered boat loads of free stuff and I know alot of people made the mistake of getting roped into a cc that they didn’t want or need just for a free sweatshirt. It is so important to remember that having a cc is not a sign of adulthood, it must be treated as a responsibilty that must be handled with the utmost respect. Thanks for the great post.
College is a great time but also a time when people like myself, mistakenly signed up for a card thinking that I was getting “Free” Money. Now three years later I am still paying off my cc for stupid purchases. Owning a credit card is serious business regardless of how old your are or where you are in life.
My daughter did this her first year at College got wrapped up with a Credit Card that she completely underestimated. She is still trying to dig her way out and that was only 2 years ago. I can’t tell you how important it is to teach yourself and your kids that money isn’t free and Credit Card are a serious responsibility.
Thanks Ratenerd for these great recommendations.
I believe, it doesn’t mean that a student with bad credit card or bad credit history is not worthy for future loans to support his studies nor it means that a student should discontinue with his studies. Student’s bad credit results due to late payments and responsibilities of which he can get rid of by taking care of his transactions and timely payments. This will help a student for his financial as well as educational development.
And oh, don’t let those credit card “freebies” and “perks” fool you. I learned that the hard way.
Thanks RateNerd for this great post. I agree, I think the problem with credit cards on campuses are how they are presented.
Here, sign up for this credit card and we’ll give you this and that! Promises, promises, freebies, miles…promises.
I am not saying that 18 year olds shouldn’t get credit cards, but it shouldn’t be so EASY and the equivalent of a bat-and-switch give away. Many of these kids were never eased into any kind of independence by their parents and, as such, make many many mistakes in their first years of college. I hope
Establishing your credit history early is an excellent piece of advice. The younger people learn to manage credit the more likely they are to have a responsible attitude towards it when they are older.
The sense of freedom that most college students feel would sometimes also be detrimental to their finances.
Great post! As a recent college graduate who got a credit card immediately upon entering university, I’m still confused as to why so many people seem convinced that young adults are not ready for a credit card. I have never carried a balance on my card for more than a month at a time. It is basic common sense to pay your credit card bill in full, and if you are unable to do so, to dedicate your time and effort to getting it paid off as soon as possible. I’m not sure this is really an age issue so much as an attitude towards debt. I don’t understand how some people are so comfortable with being in debt, but people of all age groups are guilty of this. Bottom line: use your credit card and pay it off.
I’m thrilled that my parents taught me to use credit appropriately. I heard for years growing up that you shouldn’t charge anything you can’t pay off in full when the bill comes due. Then, when I got a card to start building credit, it was made very clear to me that my card was for books only. It was only to build credit, not to buy anything extra. Plus, it was easier to track book purchases, make returns, and not worry about being over-drafted with unpredictable book expenses.
And you know what? My parents’ common sense, straightforward approach worked. I learned how to use credit appropriately and have a clean (and long) history that’s been a boon more than once.
Young teens and college students are the number one targets of credit card companies and they have done an excellent job of making young adults believe that having a credit card is a rite of passage into adulthood. They’d market with all the add-ons they’ll tell you that you need and want! Great marketing, ain’t it?
I felt like I was an adult when I got my first credit card, but honestly it’s just for emergencies.
The good news is that when you’re younger, you have those extra years to make up for mistakes and during that time, you can learn form your mistakes. As you get older, you need good credit for mortgages, loans, jobs, etc. and so there’s less room for mistakes. for these reasons, I would much rather see people learn about good credit management early in life so that they’re better prepared when they really need their credit.
I think credit cards in college are a good idea. Of course, they’re not for everybody but because the limits are usually smaller, it’s relatively safe in my opinion (i.e.: the stakes are not as high). Still, it is a credit card and if it’s abused, a poor FICO score will result.
I am a college student, and have had a credit card since my 18th birthday. I don’t make a lot of money from my part-time job but I make enough to pay the card off in full every month, or at least have the balance paid off within 2-3 months.
I have 2 credit cards, one with 300.00 limit and one with 1200.00 and my credit score is 694 (checked this past February). So my point is credit cards are good; they are fine. They are not evil as a lot of people say; they wont hurt you; they wont make you drop out of school; they wont make you get in all this debt that everyone talks about – all you have to have is some common sense pay on time and in full if possible…and yes you will need some credit history when you graduate from college and start looking for jobs. (my current employer checked my credit report before i was hired)
Abby,
You got it exactly right. Credit Cards are not evil, but they require you if you have one to show some responsibility. This is the same with a checking account, savings account, opening a CD, etc. It is not just college kids who have CC problems, anyone of any age can have CC problems. CC are great as long you don’t abuse them.
As a student with a Credit Card I can say that yes it is a big responsibility but one that has taught me a lot about money, credit, being frugal, etc. Have I been tempted to buy things I don’t really need? Sure who hasn’t. But, I know that if I can keep up a good credit score now, it will pay off even more in the future when I need to buy a car or better yet a home.
I am a very thankful student after reading all this great advice from others about CC. I was tempted to get one this upcoming semester which I won’t since I already have one and manage it as best I can. Having learned from these other comments I will be sure to talk to my roommates about CC’s, the good and the bad.
The new credit card act is a good thing and will hopefully do great things to reduce what credit card companies can and can’t do. This still means you have to show restraint and responsibility when using a CC card, much like anything else in life.
I’m looking forward to walking right by the credit card tables in 2 weeks when school starts and ignoring the so called great deals. Thank you for posting such a great post with so much great advice. I am really looking forward to my sophmore year and not worring about having another CC will make it so much sweeter.
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