Starting out as a new post-secondary student is often an exciting time of personal growth and development, an opportunity to step outside your comfort zone and encounter new ideas and experiences.
Along with that sense of adventure and growth, there also tends to be increased responsibility, especially when it comes to money.
To help make paying for things easier (and possibly more rewarding—more on that later), the early days of college or university are a time that sees many students sign up for their first credit card.
Amid all the excitement of this new chapter of life, however, it can be difficult for some to maintain the discipline and restraint that are often so vital when it comes to managing money and setting yourself up for future stability and success.
If you’re new to credit card ownership, it’s important to follow a few simple tips to make sure you don’t let your new purchasing power run wild and ruin the good times ahead. Here’s what you need to know.
Always pay your credit card bill in full and on time
Credit card interest rates are often punitively high, meaning charges on overdue accounts rack up fast. Avoid burying yourself in an avalanche of debt by ensuring you always pay the full amount owing on your bill, not just the minimum payment. It’s also vital that you remember to make that payment by the due date—even a day or two of interest charges is likely to take a bite out of your budget.
Besides hefty interest charges, missed payments will also negatively affect your credit score, which could have big implications down the line when you want to borrow money to buy a car or purchase a home. If your credit history is good, lenders will be more likely to offer you competitive rates. If your credit history is full of missed or late payments, you’ll end up paying more to borrow money on loans and mortgages, which could cost you thousands or even tens of thousands of dollars in unnecessary borrowing costs.
The best plan is to ask your bank or credit card issuer to set up an automatic payment plan, meaning you never have to remember when your next bill is due; they’ll just deduct the full amount every month.
Never charge more than you can afford
As tempting as it may be to use your new credit card to buy a fancy entertainment system for your room, or treat yourself to something equally expensive, it’s important to stay disciplined with your spending. Charge too much, and you won’t be able to follow the first rule of credit card ownership: always paying your bill in full.
If you’re worried you won’t be able to control or keep track of your credit card spending, this is a great time to start a budget and get a handle on what you can afford to charge each month. These days, most credit cards let users track their spending online, making it easy to stay on top of how much you’ve racked up in bills. Use your budget to determine how much you can afford to charge to your card each billing cycle and, once you’ve hit that amount, take your card out of your wallet and leave at home when you go out so you’re not tempted to overspend.
One is often enough
Another temptation is to boost your spending power by getting multiple credit cards. However, this can be a risky move, especially for some new credit card holders. Not only does it increase the likelihood that you charge too much to your cards, it can also make it more difficult to stay on top of spending totals and payment dates.
Holding multiple cards isn’t always helpful to your credit rating, either, because each new application leads to a hard credit check that temporarily lowers your score. Even if you’re enticed by attractive welcome offers or the prospect of rewards, the wiser course of action is to play it safe and stick with just one card for now.
Shop around for the right card
Not all credit cards are created equal, and some will fit you better than others. Ideally, you want a card with no annual fees (or low fees), low interest rates, and a fairly low credit limit to prevent you from overspending.
It’s also great to get a card that gives you something back through a rewards program. Whether your card helps you earn points for travel, money for gas or groceries, or just gives you a percentage of your spending as cash back, it’s always nice to earn something for spending money, especially when that reward fits your lifestyle.
Other credit card perks can include extended warranty coverage on some items, boosted rewards on certain spending categories, insurance coverage when travelling, and purchase price protection. Do your research and read the fine print to make sure the card you choose is right for you.
Safety and security are paramount
Regardless of where you use your card, whether it be in person or online, it’s always important to make sure you’re dealing with a legitimate business and not getting scammed. Look for the appropriate security information before entering your credit card details on a website, never give your credit card information to someone you don’t completely trust, and don’t share your card with friends or classmates, no matter how close you may be.