If you are a college student, you are probably bombarded with credit card offers each and everyday. While building credit can be extremely advantageous, it is important to understand the right ways and wrong ways to do so. Here are some credit tips for students.
Before you set out to build your credit history, it is important to understand how credit cards work. You need to know that credit cards are unsecured bank loans and not free money. You should also be aware of other consumer products such as debit cards which can be used in many cases just like credit cards without the risk of owing large amounts of money or paying interest on your purchases.
Many students arrive on campus and are inundated with credit card offers. Make sure to be a smart consumer and choose the credit card with the best terms as well as the lowest interest rates. Don’t jump for a credit card just because they offer you a free T-shirt or stuffed animal. Making a poor choice when selecting a credit card can cost you hundreds of dollars per year in interest and other fees.
Every time you make a purchase with your credit card, you borrow money from the bank. Credit cards should not be thought of as extra money in your wallet. They should be used responsibly and only for emergency or when you have the money to pay for the purchase in cash. If you use your credit cards responsibly, you will not only have very low if any debt, but will also build a good credit history.
Many credit cards only request a small amount to be paid off each month (usually referred to as the minimum payment). You should never pay only the minimum amount. Always pay at least 10% or more of the balance in order to pay off your entire debt within a year’s time. If you pay only the minimum, it can take over a decade to pay off your balance, costing you twice to three times the amount of the original balance due to interest.
If you are new to credit, make sure you are aware of the above tips. These tips can save you thousands of dollars over a lifetime and may even help you avoid credit card debt.
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