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Getting a credit card as soon as you can is a smart move – after all, credit cards provide an easy opportunity to build credit, which is important when it’s time to buy a car or a house.
Most people start using credit cards regularly for the first time in college, and as with many college experiences, it’s easy to make mistakes. To avoid credit card regret, take a look at the information below for our top five credit card tips for students.
1. Pay the bill on time
The point of getting a credit card is to build a positive credit history, but if you don’t pay your bill on time, you’ll end up doing more harm than good. The largest portion of your credit score – 35% - comes from your history with paying your bills on time. This means that if you’re chronically making late payments to your card, your credit will seriously suffer.
Make it a priority to pay your bill by its due date, and if you do forget to make a payment, call your credit card company right away to get back on track. The worst think you can do is let a missed payment linger.
2. Don’t charge more than you can afford to pay off in a month
Many college students fall into the vortex of credit card debt by mistakenly thinking that they’ll be able to pay off the charges when they’ve graduated and gotten a high-paying job. This mentality can lead to thousands of dollars in debt, which will do damage to your credit. Thirty percent of your credit score is determined by your total debt load, so if you’re carry a balance from month to month, you’re setting yourself up to start the rest of your financial life with a less-than-ideal credit score.
Don’t fall into this trap! Only charge what you can afford to pay off in one month, no matter what. This is easier to do if you’re carefully tracking your spending and keeping it in line with your income. Once you hit your limit, leave the card at home. And don’t let peer pressure cause you to overspend - no spring break trip is worth going into credit card debt for – trust us!
3. Avoid getting too close to your credit limit
Even if you’re being careful to pay your credit card bill on time and in full every month, getting too close to your credit limit is also a risky move. The credit bureaus don’t like to see you using more than 30% of your available credit – this means that if your limit on your credit card is $10,000, you shouldn’t have more than $3,000 in charges on the card at any given time.
To avoid utilizing too much of your available credit, keep a close watch on your spending and pay your balance in full every month. Not only will this keep you out of debt (see above) you’ll also avoid exceeding that 30% threshold.
4. Don’t open too many cards
The temptation to open new credit cards is everywhere, but it’s important to avoid the impulse to get a new card every time a store you’re shopping in is offering a deal. Having too many cards makes it difficult to keep track of your spending and payment due dates, and it also provides too many opportunities to get into debt.
When you’re new to using credit, the best thing to do is keep one or two credit cards for your daily spending and stick to just those cards until you’ve gotten the hang of regularly charging your purchases and paying your monthly bills. No need to overcomplicate your financial life before you have to!
5. Avoid fees
With all the great credit cards for students on the market today, there’s no need to pay an annual fee or a foreign transaction fee on your credit card. Again, your goal is to build good credit, and there’s no need to pay fees to do so. Shop around for a no-fee card that offers other rewards you’re interested in to make the most of your first credit card experience.
The takeaway: to set yourself up for a positive financial future, it’s important to open a credit card and use it responsibly as soon as you can, preferably in college. Be sure to follow the five credit card tips above to avoid turning your good credit dreams into nightmare!