According to Sallie Mae, 84 percent of undergraduate students had a credit card in 2009. Increased credit card usage allow college students the ability to build up their credit scores, but it does come with potential risks if mismanaged. If you're one of those with a card, the last thing you want is to end up graduating with massive credit card debt that will take you years to repay.
Think Before You Sign Up
Chances are you're getting multiple offers in the mail urging you to sign up for another credit card, but before you give in, take a few things into consideration.
- Be wary of anything free. If you're offered anything as a bonus for signing up, chances are you'll end up paying for it later.
- Assess your financial situation. If you can easily pay for things with cash or a debit card, you may save more money paying that way.
- Figure out what kinds of purchases you'll be using your card for. Don't ever use it to buy items you don't need or simply can't afford. If you have a specific plan of use, like keeping your card strictly as an emergency resource, you'll be more likely to stick to your budget.
Not every card is the same, so keep in mind these important factors when choosing a provider and a plan that's right for you.
- Look for a low Annual Percentage Rate (APR). This is how much interest you'll have to account for if you don't pay off your balance every month. Be aware of low introductory rates that will change over time, as they can be a surprise expense in the future.
- Choose a card without an annual fee, or a very low one. That way, you won't be paying the company to have the card if you don't use it regularly.
- Make sure you understand the default interest rate. Depending on your agreement, this is what you may have to pay if you miss a payment and sometimes it can be double or triple the interest rate.
Manage Your Usage
Once you get a credit card, it's up to you to use it effectively.
- Pay off your balances in full and on time every month. This will get rid of the stress of having any debt and ensure that you won't be responsible for any fees or charges.
- Make your payments as early as possible just in case. A week or so before the deadline is a good time to pay off the balance so you know it will be processed before the due date.
- Look into enrolling in an automatic payment plan. That way, you won't have to worry about accounting for mail time and you can rest easy knowing your bill is covered.