For students mastering life with credit cards, look past low intro rates, stick to on-time payments, watch your utilization, leverage perks and never max out your cards.
Credit cards can be a big part of student life. Using them responsibly can make all the difference, helping you graduate with a healthy credit history and a good credit score – two numbers almost as important as your degree.
College is also when many of us get our first credit card, or at least start using them on our own. Master the basics. Know how to avoid fees and charges, and harm to your credit score that can follow you post-graduation. Here’s five credit card tips just for students:
1. Understand your interest rate past the introductory period
If your new student credit card comes with a low or 0% “introductory rate,” be aware that is not the interest rate you’ll see down the line. Instead, after the introductory period (often 12 to 18 months), you’ll probably face much higher rates, ranging anywhere from 18% to 24%.
If you don’t know it yet, those are tremendously high rates! By all means, take advantage of that introductory rate. But make sure you can afford what you charge – and can pay it off before the higher rates kick in.
2. Pay your balance off monthly
Make sure to pay off your balance in full every month or at least make your minimum due payments on time, every time. Whenever you carry a balance, you’ll pay interest charges, but if you at least make a minimum payment on time, you won’t ding your credit score.
3. Keep an eye on your utilization ratio
Your utilization ratio tracks the amount of credit you’re using. Most credit reporting agencies monitor your ratio – and want you to use no more than 30% of the credit across all your cards. That’s the level they see as responsible credit use.
Track the balances on all your cards. Try to pay down your balances. When you carry lower balances every month, your credit score is more likely to go up.
4. Take advantage of perks and rewards
A lot of credit cards come with awesome benefits: travel rewards, discounts at retailers and cash back on things like gas, movies and food. Take full advantage of them. But don’t spend money you can’t pay back. Card rewards can be a trap, enticing you to spend what you can’t afford.
5. Don’t max out your credit cards
This is a big one. Keeping a high balance on your credit card is not a good idea. In fact, if you have multiple cards maxed out at the same time, your credit score will drop (because your utilization ratio will be above 30%).
You’ll also pay a lot in interest charges, especially if you don’t clear them before the low introductory rates end.
Don’t put all your eggs in one basket and max out a credit card. It’s perfect to have one egg in a basket if you’re making small, conscious steps towards a debt-free life. Just make sure you don’t break that egg or destroy the basket and you will be good to go managing your credit card in college.
Chayla Soden is a high-level content marketing writer located in the United States. She has a BA in English and has been writing for many years