Student Credit Guide
College can be overwhelming all by itself. Many times students are changing the aspects of their lives that have remained static for 18 years. Responsibility is no longer being carefully handed out in small, manageable pieces. New college students get it all at once, and more often than not its now sink or swim.
Students are generally acutely aware of the importance of their educational experience. When a degree is earned, the jobs you can qualify for are more attractive, and the earning potential becomes a great deal higher.
What is not normally considered is how badly a credit history can be damaged early on. When banks examine a credit history, the fact that you were 18 years old and a full time student makes little to no difference at all if you failed to pay the interest owed on your student credit card. Student credit cards, like any credit card, are loans. If you take out a loan from a bank, then fail to pay your loan back, the bank comes after its money. At this point, even if you pay the loan off you have damaged your credit history.
Student credit cards are no different. Failure to pay and to a lesser degree late payments will hurt your credit history. To a consumer with an established credit history, this can be an inconvenience. For a student with no history, this damage can be severe. The student has gone from no credit history to bad history, with nothing else on record.
Student Credit - General Guidelines
The following guidelines might help avoid some of the general pitfalls:
- Budget Your Money This is not just for your student credit card. Know how much money is coming in, and plan for where it is going. As a rule of thumb, your credit card bills should not exceed 10% - 15% of your monthly budget.
- Record Transactions Always be aware of how much your student credit card bill is going to be at the end of the month.
- Pay Your Bill This seems obvious, but remember late payments are damaging. Pay the bill, and pay it on time.
- One Student Credit Card is Enough Do not apply for more than one credit card at a time. When you are accepted for one card, stop. That’s all you need until you get a better understanding of credit.
- Credit Means Business Student credit cards are serious. For the most part, they can damage your credit history as badly as a standard credit card. Be careful.
Interest Rates & Student Credit Limits
Lastly, when choosing a student credit card there are two attributes you must pay attention too: Interest rate and balance.
Your interest rate defines how much your student credit card provider is going to charge you for the use of their service. This seems simple, but credit card providers tend to make offers that can be confusing. Of the many ways they can do that, offering an introductory interest rate seems to be the most common. This means that when you open you account your rate will be lower, and at some time in the future (often 3 to 6 months) that interest rate will go up. What you want to look for is the Fixed Rate. A fixed rate will generally not increase without your consent. Consider that the bottom-line.
Balance can mean two things. How much you currently have charged on your card, or how much you CAN charge on your card. You charge limit is also called Credit Limit. It would seem that having the highest credit limit you can get would be the best way to go, and the credit providers would agree with that. This however isn’t always true. As a general rule, don’t allow yourself to have access to a credit limit that you can’t pay off completely in 3 to 4 months. This will help keep you from falling behind in your monthly payments.
Your credit history will follow you around for the rest of your life. Let you student credit card help you make it a good one!