Student credit cards can be an excellent way for young people to manage their money and build credit, but if they are used incorrectly, credit cards can put young adults on the road to financial problems. However, if students develop good credit card habits early, they can avoid common mistakes and enjoy the perks of plastic. This guide will help students manage their first credit card.
Ace Credit Card Terms
You will want to study credit card terms just as carefully as you would a textbook for class. When you understand these terms, you will know what you owe, when the amount is due and your options for paying it back. Here is the credit card vocabulary you will want to learn:
- APR: The annual percentage rate is the amount of interest you will have to pay if you carry a balance each month.
- Annual Fee: This is a fee charged by your credit card issuer each year for having an account with them.
- Balance Transfer Fee: The amount of money you will have to pay if you move a balance from one credit card to another.
- Cash Advance Fee: This is similar to a withdrawal or ATM fee. It is the amount you will be charged if you take money out at an ATM using your credit card.
- Due Date: The day of the month that your minimum payment is due.
- Late Fee: The amount you must pay if you do not make your minimum payment by the due date.
- Rewards: Points that you can earn towards cash back or products for every $1 you spend on your card.
If you understand these terms before you open your credit card account, you will be in a better position to responsibly manage your credit.
Don’t Be Tricked by Offers
Since credit card companies target college students, you may be confronted with many appealing offers. However, make sure you review the terms and conditions of every offer that comes your way. If something looks too good to be true, it probably is.
The same holds true for store credit cards. You may love shopping at Walmart, Old Navy or JCPenney, but you do not necessarily have to have a card for that store. In fact, most store cards come with a high interest rate and few rewards options, despite what the advertisements may claim. Plus, every time you apply for a loan, credit card or any other line of credit, your credit score decreases. You do not want to needlessly lower your score.
Track Your Spending
You can monitor your account balance online and set up text message and email alerts. This will help track your spending and know if you are nearing your credit card’s limit. When you review your transactions and balances online, make sure you also take note of your available credit and amount owed.
Monitor Your Account
While you are tracking your own spending online, you will also want to confirm that you recognize all of the charges. If you do not recognize a charge, it means someone may have stolen your credit card or identity. The sooner you can catch these fraudulent charges, the better, as you can contact your card issuer and have them remove the charges. Nearly all credit cards have identity theft protection, but you still need to report the charges. Review all charges before you pay your bill each month, and definitely contact your card company if you see any mysterious charges.
Pay Off Your Balance
Before you charge anything to your account, you will want to have a plan as to how you will pay back the money. Many first-time credit card holders find themselves in debt quickly, but if you always have a plan in place before you charge something, you can avoid this trap. For example, if you want to purchase a $250 item with your credit card, make sure you have the $250 set aside before you make the purchase. If you plan on making a large purchase and paying it off over several months, make sure you have a reasonable time frame in mind and know how much carrying that debt will cost you in interest. Always pay more than the minimum payment, as making only the minimum will keep you in debt for many years.
Use Your Card Regularly, But Responsibly
To get the most benefits from your student credit card, you will want to use it regularly but responsibly. You do not want to accumulate a large amount of unsecured debt, so if you cannot resist the temptation of spending money you don’t actually have, wait to get a credit card until you are ready. When you do feel as if you can trust yourself, follow these credit card tips for students. The bottom line is: make sure you can pay off your balance on time every month, and you will never have to worry about credit card debt.