With the availability of credit cards, it has become easier than ever to go shopping and buy your favourite stuff even when you don’t have the cash — nowadays, there are plenty of options available including credit cards, debit cards, Apple Pay, Venmo and a lot more.
If you’re in college, a credit card offers you the security of paying for things you couldn’t access without cash earlier. These cards are acceptable nearly everywhere including online payments, POS transactions, retail stores etc.
And we believe that they’re a great way to start building your credit history- however everything comes with a price, and so do credit cards. Being a student, you must be aware of the PROS and CONS of this facility- because, once you fall in credit card debt, it’s not easier to repair credit without taking help from credit repair agencies.
So, let’s dive in to know more about how students can get the maximum advantage of credit cards and what tips and tricks they should know before availing of this facility.
Why should college students have a Credit Card?
Building Credit History
One of the biggest advantages students can take from credit cards is they can build their credit history from a very young age. And why is that crucial? Because, if you’d keep paying your bills on time, it shows your financial credibility and financial behaviour to lenders. In case of maintaining good credit history, lenders would accommodate you for future borrowings and lower rates of interest easily.
Don’t make unnecessary payments from your credit cards, instead consider it your emergency fund for emergency situations or expenses that come out of the blue.
Credit Card Tips College Students in NYC Should Be Aware Of
Pick a student card
The student credit cards are specifically designed for students, keeping their needs in mind. These cards specifically cater to their requirements, while offering lower interest rates with a minimal annual fee.
It isn’t as simple as it sounds, it is crucial to keep a record of your expenses and not overspend as you have to pay the credit back in time.
Setting Spending Limits
Establish clear spending limits for different categories, such as groceries, entertainment, and transportation, to ensure you don’t overspend.
Using Credit Cards Responsibly
Paying On Time and in Full
Always pay your credit card bill on time and in full to avoid interest charges and late fees.
Avoiding Minimum Payments
Paying only the bare minimum will ultimately accumulate interest and long-term debt on you. Thus, always try to pay back as much as possible to stay out of the debt trap.
Monitoring Your Credit Score
Regularly check your credit score to track your financial progress and identify any discrepancies or issues.
Avoiding Common Pitfalls
Resist the urge to make impulsive purchases. Take time to evaluate whether a purchase is a necessity or a want.
High Credit Utilization
Try to keep your credit utilization ratio below 30% to maintain a healthy credit score.
Late payments can negatively impact your credit score. Set up reminders to avoid this pitfall.
Managing Student Loans and Credit Cards
Balancing Debt Repayment
If you have student loans, stay focused on managing them alongside your credit card debt. Prioritize payments to minimize overall debt.
Prioritizing Higher Interest Rates
If you carry a balance on multiple credit cards, prioritize paying off the one with the highest interest rate first.
Emergency Fund and Credit Cards
Importance of Emergency Savings
While credit cards can provide a financial safety net, it’s essential to build a separate emergency fund for unexpected expenses.
Using Credit Cards as a Backup
Reserve credit card usage for emergencies and planned expenses, rather than relying on them for everyday purchases.
Final Words – It Isn’t Free Money
Although a credit card is a great facility, it can prove to be a slippery slope if you won’t get hold of your finances in time! It’s a huge responsibility as well and thus it’s important to use it wisely. It is great to open a credit card account, but don’t fall into a trap if you’re not able to pay it back in time.