Do You Know How to Use Your Student Credit Cards Wisely?
You’ve just peeled your very first student credit card off the acceptance letter, shiny and clean and all yours. It comes with all kinds of incentives to use it: rebates on gas, cash back on purchases at the right stores, maybe even a points system that can add up to free checks in the mail. Isn’t it great to have a brand new card? Why not take your student credit cards on a spending spree right away?
Before you put any new student credit cards through their paces, think twice. According to a federal report, the average student in New York state has four credit cards and has $3,173 in credit card debt. That’s in addition to debt from their college loans, and is probably accruing interest at a higher rate than the national average. It’s a heavy burden to bear when you’re fresh out of college and still looking for a good job. And it’s an easy burden to pick up. $3,173 is barely $793 a year. That’s $66 a month or $15.25 a week. Spend one evening at the bar, or buy a few CDs, or charge a couple of your books for the semester, and you’ve added that much to the debt you’ll be working for years to pay off.
Is there an escape? Of course. Use your student credit cards wisely. Follow these simple guidelines:
* Pay off all or most of your balance each month. You do need to use your credit card to build your credit history. You don’t need to carry a balance.
* Charge only things you really need. It’s easy to think of credit as fun money, but you have to pay for all those extra treats eventually. Charge only when you truly need an item and you know you’ll be able to pay it off shortly.
* Don’t let the promise of rebates or points sway you to charge more. The money you’ll pay in interest exceeds the money the credit card issuer will give you as part of the reward program. (That’s why they have rewards programs.)
* Avoid racking up fees by paying your bills on time. Between the average late fee of $35 and the way credit card companies jack up your interest rate when you miss payments, you can accrue hefty extra debt just by not paying on time. Don’t start down that spiral! If getting bills in the mail on time is a problem for you, automatic payments can be a lifesaver.
Use your student credit cards wisely, and you’ll leave college with good credit and no credit card debt. That will make your life easier as you rent an apartment or buy a house, lease a car, and establish yourself after college.
September 1st, 2009 at 3:05 pm
This was a great post.
September 4th, 2009 at 3:15 pm
Helpful post.
September 5th, 2009 at 3:17 pm
Yearly fees are a leftover from the era when only the rich had credit cards. Nowadays, no good credit card charges an annual fee. If the credit card offer you like best does have an annual fee, ask the issuer whether it will waive the fee for you. Many credit card issuers will. They assume that the only people who will let the fee stay on their contract are the inexperienced credit users, and the more savvy customers will ask them to waive the fee as part of the application process.
September 9th, 2009 at 3:25 pm
Right now card companies can choose which part of your balance to apply your payments to, meaning that if you roll over $3,000 in debt to a new account with a lifetime 3. 99% interest rate, then make a $150 purchase at the credit card’s regular 14% interest rate, that $150 will sit at the back of your account, accruing interest rapidly, until you’ve paid off all $3,000 of your debt at the lower rate. The change to the credit card laws will prevent you from paying more in interest for that $150 purchase than you paid for it in the first place.
* It will no longer be easy to go over your credit limit accidentally. Right now, credit cards usually allow you to exceed your credit limit, but charge you $35 or more per charge over the limit, letting you accrue substantial fees without realizing it.
October 20th, 2009 at 12:10 am
Thank you.
November 20th, 2009 at 4:52 am
This will put an end to the old trick of sending out statements too late for the customers to pay them on time, resulting in late fees, interest rate hikes, and other penalties that put more money in the companies’ pockets and destroy consumers’ credit ratings. The change also gives you more time to budget for your student credit card bills, lessening the chance that you will pay late.
* Consumers will have the option to refuse any hikes in fees and interest rates. If they refuse the credt card company’s proposed fee or rate hikes, their account is closed, but they may pay off the remaining balance under the more favorable terms they had beforehand. For instance, if your card issuer wants to hike your interest rate from 10% to 14% and your late fees from $35 to $50, you can refuse.
December 17th, 2009 at 5:03 am
Great post.