Credit Tips for a New College Student

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One of the biggest challenges for new college students is learning how to manage money for the first time on their own.  Did you know that finances are the number one reason cited by students for dropping out before completing their degree? Adding credit cards to the mix adds to this stress and can have very serious financial implications if you’re not careful.  In a recent study on the financial attitudes and behaviors of first year college students, over 30 percent of students already had credit card debt in excess of $1,000!  In addition, 40 percent indicated that they did not plan on paying off their credit card bill in full each month, and 35 percent did not plan on paying their credit card bill on time.  This underscores how the lack of financial knowledge and irresponsible credit card use can lead to raking up too much debt too quickly.

Here are some tips every college student should heed when it comes to credit cards:

  • Don’t get a credit card. Use a debit card instead until you gain experience with managing your bank account, budgeting your money and controlling your spending habits.
  • Don’t feel pressured into thinking you need a credit card to build credit. While it is important to build credit, the absence of bad credit is more important to prospective employers or lenders down the road.  It takes time to build good credit, but very little to ruin your credit with some early mistakes such as forgetting to pay bills on time and/or having it sent to collections.
  • Consider becoming an authorized user on your parents account. If you or your parents really think you need a credit card for emergencies, check to see if they can make you an authorized user on their account.  In addition, some card companies will allow parents to set lower balance limits for that user.
  • Don’t put your co-signer at risk. You can’t obtain a credit card until you are 21 unless you have a co-signer or can demonstrate sufficient income (albeit the thresholds are very low for some card issuers).  However, if you ask a parent or other adult to co-sign for you, you are putting them on the hook for any of the debt you don’t pay.
  • Only charge what you can pay off each month. If you have a credit card, only charge what you know you can pay off each month. Whenever possible, avoid making large purchases—such as a new computer or TV—with credit. Instead, set aside money until you have enough to pay cash or with your debit card.
  • Put your card on ice. If you are already carrying a balance, stop using your card and set a goal to pay it off as soon as possible.  Always pay on time to avoid late fees on top of interest charges.
  • Ask for help. Never hesitate to ask for help. If you feel you are getting in over your head, reach out to your family or a college financial aid or literacy counselor before it’s too late.
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  • Catrina Yates

    My biggest problem is that the needs of myself and my family pile up for so long and when I get my loans, I try to save on my books and expenses so that I can get some of those needs met. Then I under budget and over spend and end up in the same busted and broke situation. I can not get through the semester without going broke.