Credit Cards for College Students - What You Need to Know
As Pink Floyd said, "Money, it's a gas. Grab that cash with both hands." This is exactly what the credit card companies want the younger generation to do - grab it and use it. What most students often forget is that "buy now" still means "pay" whether that is now or later.
Credit card debt is a big problem amongst college students and can withhold good loans and the best interest rates. If you are in college or have kids that are in college make sure that you/they are careful with how much is spent on that card. Im not advocating for students to avoid credit cards all together, but rather to use them wisely so that their credit scores do not lower and prevent a financially healthy future. In fact people should build their credit as young as possible to ensure a substantial credit card average age file and to have lower debt ratios at a prime age.
A good credit file and score can help young adults prepare for investments, obtain the best mortgage loans or even get a job. A credit card can be used for emergencies, larger expenses, phone or internet payments, etc. You might want to start out small and get a gas card or a department store card. These cards can only be used at specific places and can help keep spending to a minimum.
If you do want to get a non-specific credit card, get one with the best possible interest rates you can find and with a low limit like $500 or $1,000. A $10,000 limit can make college students a little spend happy, since many of them are not used to having access to such a high quantity of money. Shop around because some companies will offer college students interest-free periods but then hike up the interest once that period is over.
Once you decide on a credit card you want to keep track of your spending. Budgeting is incredibly important when you have a credit card, because you do not want to max out the credit card. Plan out key expenses like groceries, rent, utilities, etc. and keep track of moneys earned whether it is from a job or from parents. Try not to spend more than you make. Even if you use your credit cards for small things such as clothes, gas, food, etc., be aware that it all adds up and you could be stuck with a huge bill at the end of the month on top of all your other expenses.
Now that you have planned your expenses, keep track of your bills and pay all of them. If you can afford to pay off your credit card every month, do so. And if you cannot, at least pay more than the minimum this will save you from paying a lot of unnecessary interest. Always pay bills before the due date to avoid fees and lowering your credit score. Every missed or late payment affects your score and will increase your interest rates, costing you a lot more money. Unlike teachers and parents, credit card companies will not take any excuse you might have for not paying a bill. If you do get stuck with high interest rates, you can always transfer your balance to another card to buy you some more time.
Credit cards are a good way to start building your credit file and to gain valuable responsibilities that will help you in the real world. With your new credit card, remember that it can help you or hurt you depending on how you use it.
To learn more about how you can help increase your credit score, go to Dr. Alan Rosenthal's website at http://www.financialsolutionservices.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE Credit Repair and Enhancement Workshop by visiting http://www.financialsolutionservices.com/upcomingevents.html For additional information listen to one of Dr. Alan Rosenthals credit talks at http://www.financialsolutionservices.com/credittalks.html
