College has been back in swing for about a month now, and for many freshmen, it can also mean getting their first student credit card. While the Credit CARD Act of 2009 severely restricts handing out plastic to those under 21, you can get a card if your parent co-signs on the card or if you can prove that you have the income to pay the bills. Your first credit card can be a great personal finance tool, but can also bring disaster if used recklessly.
A college student I know recently asked me if I had some tips for using his first credit card, so I thought I would share my ideas here as well:
- Get a rewards credit card if you can. It’s OK if you don’t qualify for one yet on your own, but if you do, even better! Your rewards will add up as you use your card, and many cards allow you to redeem points for air travel, electronics, gift cards and more. I often redeem my reward points for gas station or grocery store gift cards, which cut down on some expenses.
- If you can’t qualify for a basic credit card on your own yet, don’t give up. You can apply for a secured credit card, which is much easier to qualify for and can help you build up the credit you need for a regular card. Essentially, you put up your own money as collateral for what you charge. But watch out for fees! Read the fine print before you sign up.
- Use the card with restraint. It’s important to remember that credit cards are not free money, but short-term loans. Don’t use them to buy things you can’t afford. It’s one thing to charge some textbooks that you know you can pay off in a month or even two, but it’s another to use credit to buy a gaming system that you won’t have money for in the foreseeable future. However, if you don’t use your credit card at all, you won’t build credit. You have to find a balance between keeping your account active and using it responsibly.
- Avoid retail cards. Their interest rates are extremely high, and they’re easy to get suckered into with the immediate discount. Instead, sign up for those companies’ email newsletters — you’ll hear about exclusive deals that way without having many of unnecessary lines of credit open.
- Keep track of your plastic. I can’t tell you how many friends accidentally left credit cards at bars in college; they got a few drinks in them and forgot to close out their tab. Their cards were left at the bars overnight. That’s identity theft waiting to happen.
For more money and credit advice, check out 10 of my favorite blog posts from personal finance bloggers from the past week.
1. I recently told my husband that I really needed a haircut and new running shoes, but he quickly reminded me that I didn’t truly “need” them — I wanted them. Moolanomy discusses the concept of how much is enough and the difference between want versus need.
2. Planting Dollar$ shows how you can create a debt repayment spreadsheet to help track your debts.
3. While credit cards can be convenient, cash still has its merits. My Dollar Plan lists since reasons why she thinks you should always carry cash.
4. Brip Blap helps readers understand how to make ends meet if they are unemployed; one of the keys is talking to your creditors if you can’t pay your bills
5. Not all debt is created equal. Debt Free Adventure explains the basics of the various types of debt, such as credit card debt and payday loans.
6. I got hitched earlier this year, and can attest to the fact that the wedding industry offers endless ways to hemorrhage money. As a father with three daughters, Wealth Pilgrim outlines several ways you can save huge amounts of cash on a wedding.
7. As the saying goes, “more money, more problems.” Cash Money Life explains precisely why more money is not always the answer, and why how you manage your money is more important.
8. Free From Broke debates a common predicament: Is it more important to save or pay off debt?
9. Want a smartphone but can’t justify one on your budget? Out of Debt Again shares a secret way to get smart phone functionality out of a regular cell phone.
10. Redeeming Riche$ outlines several ways to improve your wealth, including learning to manage your debts well.