According to a recent study by Sallie Mae, college students had an average of five credit cards with an average amount of $1,423. About 6% of students have a credit card debt of more than $5,000. If you’ve skipped or defaulted on your credit card payments, graduating with a large amount of debt might put a damper on your ambitions to join the workforce.
Having a good credit score is essential
When you use a credit card, your history is recorded in a credit report, which is then used to determine your credit score. Even utility companies utilize your credit record or credit score (or both) to determine whether or not they would accept your applications and at what price.
Having a lot of credit card debt might have a negative impact on your credit rating and score. If you have a history of late payments, your credit score will also be affected. Your loan application may be denied, and you may be unable to rent an apartment as a result. A co-signer may be required by a landlord. Unemployment is a possibility. When signing up for new utility services, you may be required to put down a large deposit.
For those just starting out, having a strong credit history is critical. There are several factors that go into determining whether or not you will build a strong credit history while in college.
Tips for Using a College Credit Card
Credit cards don’t select you. Do not sign up for a credit card unless you are certain that it is a decent offer. If you get a credit card, read the fine print. Compare the fees and interest rates to other credit card offers you’ve gotten to be sure they’re competitive. Afterwards, you choose the finest credit card for you. There is no annual fee, a low interest rate and a limited credit limit on the finest student credit cards.
If you can’t afford to pay, don’t impose a fee. It’s undoubtedly been thought that credit cards are for charging goods that you can’t afford right now but will be able to buy at some point in the future. It’s the fastest method to rack up a debt you can’t pay off that you use a credit card. Minimum payments that seem to make it simpler to pay off a debt in fact increase the cost. For a $20 pizza, you may wind up spending $100.
You just need one credit card. As tempting as it may be, you should limit the number of credit cards you have open at this time. Every time you apply for a new credit card, your credit score goes down. The more cards you have, the more likely it is that you’ll rack up debt.
Every month, make a complete payment on your account. You may prevent credit card debt if you pay your amount in full when you get your statement. The additional fees credit card firms impose on customers who don’t pay in full would also be avoided.
Avoid going above your credit limit at all costs. Over-the-limit fines are costly and difficult to remove. Your billing cycle and payment dates may induce you to believe that your amount is less than the limit, but financing charges and other costs might quickly push you over. The best course of action is to restrict your spending to no more than 10%-30% of your credit limit.
Avoid cash advances at all costs. They’re not as appealing as they first seem to be. In addition to the financing costs on the cash advance, which are likely greater than the interest rate on your purchases, you’ll be charged a 2-4 percent cash advance fee. Additionally, your monthly credit card payments will be divided between the two accounts.
Encourage your pals to obtain a credit card for themselves. It doesn’t matter whether the person who used your credit card paid you back or not; you’re still liable for any charges that were made using your card. After all, the credit card application was signed by you, not your buddy. To avoid becoming frenemies in the blink of an eye, it’s wise not to combine your friendships with money.
Close the card with confidence. To avoid damaging their credit ratings, I usually advise customers not to cancel their credit cards. You should, however, consider closing your credit card account if you don’t have the money to make your payments and you know you’ll be reckless with your card. Closed credit cards aren’t as damaging to your credit as a credit card delinquency.
As a rule, don’t rely on your parents for financial help. As soon as you become financially independent, you are solely responsible for all of your credit card bills. No one should be held responsible for paying off your parents’ debts or saving for their retirement because you made a credit card error. If you find yourself in a bind, you may be able to borrow money from your parents to make ends meet. Repay your parents and pledge never to fall into debt again in exchange for canceling the credit card you owe them.
The appropriate technique to use a credit card is not provided by the credit card companies. To the contrary, they want it if you make expensive errors so that they may charge you more interest and fees in the future! Follow these pointers to avoid debt and maintain a good credit rating.