How to Use Student Credit Cards Responsibly
Posted 07/20/09
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 use student credit cards right away?Before you put any new student credit cards through their paces, think twice. In New York state, the average college student emerges from school with four credit cards and $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 load of debt to carry when you're new to the full time workforce and still looking for a job in your field. 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. Buy a pair of jeans or a new pair of sneakers, charge a few pizzas, and you've added that much to the debt you'll be paying off for years to come.
How can you avoid this? Use your student credit cards wisely. Use these rules as a guide:
* 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. Put an item on your card only when you know you need it and you'll be able to pay off the credit card in a month or two.
* Don't let the promise of rebates or points sway you to charge more. It's tempting to spend a few more dollars so you'll earn enough for a rebate check, but the interest you'll pay will cost you far more than the rebate check is worth. (That's why they have rewards programs.)
* Avoid extra fees by paying your credit card bills on time every month. 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 remembering to pay your bills on time is a problem, set up automatic payments at your bank. They're a credit saver.
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.