9 Credit Card Tips for Students
Student life is many things but cheap is not one of them. Many students are on student loans, have student lines of credit, and have debt on credit cards just to cope with the financial demands.
With a third of U.S. college students having credit card debt, understanding these credit card tips for students could be the difference between a sound financial situation and an uphill battle of paying back high-interest debt.
Why You Need to Understand Credit Cards
Debt as a whole affects many students. In 2020 U.S. student borrowers owed an average of $50,247 CAD in student loans. In a Canadian study three years after graduation, 66% of grads still had student debt, as 53% of Bachelor graduates left university with a median of $20,004 owing.
Debt is common for students. Understanding debt is important, but credit card debt, with high interest rates and easy accessibility, could be the problem that leaves you on the hook for more money than you ever imagined.
Comprehending the impact of credit card debt can change your financial future and learning it while still in school can prevent you from financial distress.
If used correctly, credit cards are a fantastic way to start building financial management skills for your future while also improving your credit score. Here are some tips to help you manage your credit card.
Tips to Avoid Credit Card Debt
- Don’t Spend Money You Don’t Have– Credit cards allow you to walk into a store and purchase whatever your heart desires, as long as you have room on your card. This doesn’t make it a good idea.
A credit card is an excellent tool when used to your benefit but it is not play money. If you don’t have the money in your account, don’t use it or you may be paying it back for a long time. - Pay Your Bill on Time- Prioritize your student credit card payments so you can build a good credit history. This will help you access better credit in the future with products such as higher value credit cards, mortgages, loans, and so on.
Paying your bill late affects your credit score, which can affect any loans or investments you wish to make in the future. - Pay the Full Amount- On your bill you will be given the option to pay a partial amount. This is where the credit card companies make their money. When you do not pay the full amount, you start to accumulate interest on the remaining amount.
This remaining interest keeps accumulating and compounding daily (not for your benefit) until you pay off the balance of your credit card. If you prolong this, your purchased item could end up costing you way more than the purchase price. To avoid this problem, fully understand tip #1. - Avoid Cash Advances- A cash advance is when you take out money from your credit card such as from an ATM. A cash advance will most likely cost you a fee up front and then a high interest rate from the time you took the money (typically 22-25%).
Also, cash advances do not have a grace period such as a credit card purchase. This is an expensive way to use your credit card and there are other ways of borrowing money at a much better rate. - Keep to One or Few Credit Cards– Having several credit cards could imply poor spending habits. It will also be difficult to keep track of your spending and you’re more likely to miss a payment on one of your credit cards. Having access to too much money can be a problem for many.
Strongly consider which cards you need and why. From department stores to banks, you will be offered many credit cards in your lifetime. Think rationally about your needs before you sign up for the instant discount you may receive.
How to Benefit from Your Credit Card
- Use It as a Free Short-Term Loan- When paid on time, a credit card is essentially a free monthly loan. Knowing your grace period is vital to having a credit card work to your advantage.
You can make a purchase and not have to pay for it until your next bill due date. If you miss this date, you will pay extra for your item with interest. - Set Up Automatic Payments- With a credit card you have the ability to setup automatic payments for your bills. This could include your phone bill, Netflix, internet and any other re-occurring bill.
Setting up automatic payments gives you the benefit of not having to worry about missing payments and it all comes in one convenient bill at the end of the month. - Collect Rewards- Many cards will have some sort of rewards. From travel points to cash-back, find a card that will benefit your needs. Most student cards will have a basic rewards program but know what these are before applying for a credit card.
- Plan- Knowing your needs and estimating what you need to spend in a month should allow you the room on your credit card. Use your student credit card for basic needs and know when you’ll need to make bigger purchases.
Keeping a record of your spending will help avoid overspending and make it easier to pay your credit card bill on time.
Use Credit Cards to Your Advantage
Credit cards when managed well can be an excellent tool to have. From building your credit score to automating payments, credit cards can make life easier.
Not understanding how a credit card works can be detrimental to your future, so take the time to learn these credit card tips for students and of course, always shop responsibly.
By: Robert Puharich | September 19, 2021 |
