Finding the right student credit card can be an effective tool to establish your credit history. However, getting the most out of a student credit card is only possible if you know how to use it responsibly.
You’ve probably heard stories from friends and family about struggling to crawl out of a sinkhole of debt, but that doesn’t have to be you. Keep reading to find out how to use a student credit card without getting into debt.
Keep your credit utilization low
Keeping low credit utilization is essential to staying out of debt and maintaining a healthy credit score. Your credit utilization is the ratio of the amount you owe compared to your credit limit amount. It’s recommended to keep your total credit utilization rate under 30%. If your credit limit is $500, you should only have a balance of about $150, if not less.
Only spend what you can afford to pay
Keeping a low credit utilization ratio will require you to be mindful of how much you spend each month. So, only spend what you can afford to pay off.
Remember that a credit card is essentially a loan you need to pay back each month. Try to pay off your entire balance so you can avoid having to pay interest. No matter how high your credit limit is, make sure you’re only spending what you know you’ll have the funds to repay, so you don’t end up in a downward spiral of debt.
Always pay on time
Missed payments can negatively affect your credit score over time. You can steer clear of getting into debt and risking your credit score by making consistent on-time payments. Your credit card issuer will charge interest and a late fee even if you make a payment one day late; luckily, it’s easier than ever to make sure you make every payment on time.
There are a few ways to make sure your payments are always on time. You can sign up for push notifications and text alerts with your credit card issuer to receive a reminder to your phone when your bill is due. You can schedule your own reminders on your calendar or planner. Or you can schedule your monthly payment on autopay, so you never forget it. Just make sure you have the funds available in your bank account to cover the charge.
Understand the terms and conditions of your credit card
It’s important to understand your credit card terms to stay out of debt and better manage your finances. Getting to know the terms of your credit card agreement will help you identify what will happen if you miss a payment, what your billing cycle is, and how much your late fees and interest fees are. The more you know, the more you’ll be prepared for whatever comes your way.
The bottom line
Having a student credit card can benefit you greatly as you journey further into adulthood. A great credit score can help you can rent an apartment, purchase a home or car, and even qualify for a job. It’s best to practice habits that will keep your credit score and finances in good standing, so you can graduate from college with an excellent credit score and no debt left on your card.