College Credit Card Tips

For students entering college, there’s an enormous amount of new information and responsibilities to deal with. The typical student goes from living with a family to living in a dorm, learning how to get along with roommates, having to take more responsibility for his or her own health, diet, laundry, transportation, and finances, not to mention the stepped-up academics that college requires. With all these new areas to learn about, you may find some tips about credit cards useful.

. . . the rules about acceptable levels of debt, that is. Experts give figures for an appropriate debt-to-income ratio as being about 25%. This means, if you earn $5,000 at summer and school year jobs, you can live with having a $1,250 balance on your credit card, right? Wrong! First, this ratio is high for people earning a living full-time. For a college student, it’s basically outrageous. Go for a $0 balance, and remember that most other "rules" about credit, like those that follow, are good to comply with.

Teaser rates on store cards can look really good, but read before you opt-in, especially the ones that offer a 0% finance rate for an introductory period or no payments for a period of time. In the first case, you may still be making payments and have extraordinary penalties if one is late. In the second case, your principal may be accruing interest during the time you’re not paying. Read the small print, and if you don’t understand it, ask someone who will and whom you trust to help you out.

Eventually, in order to build your credit profile and to address a variety of needs, you may wish to have multiple cards. For now, in most cases it’s best to learn to walk past the tables set up during orientation to lure you to get another credit card and to shred the weekly mail offers you receive both in your dorm and at home. You are much more likely to manage your finances rather than having them manage you if you start with one card and learn how to use it responsibly.

If you do have a good reason to have multiple cards, make sure to make time to review them together and to keep track of the combined balance to avoid surprises. A little here and a little there can add up. . . .

Yes, your credit card would allow you to buy a wide-screen tv, a front row ticket to a Snoop Dogg concert, or whatever your heart’s desire is. But if it’s beyond your credit limit, you should pass it up. If you keep your credit limit low and stay within it, you will not only avoid fees and penalties, but you will proactively prevent any serious debt from accruing. Another thing to avoid is using your credit cards for items that could qualify for a student loan. The interest rate on your credit card after the introductory period is over is unlikely to match that offered for a student loan, and as a result, your education will cost more.

It’s a good idea to keep a balance in your checking or savings account to cover a couple of months of credit card use, just in case. That way if you were to miss work because you were ill, or had the opportunity to study abroad or take a vacation, you would still be in good shape financially.

Yeah, it can be a pain to check every statement and look in on your credit report at annualcreditreport.com once a year, but when you sail cleanly through the financial world, avoiding incorrect charges and identity theft, you can consider the time a really, really good investment. If you set up a manila folder to file your statements in and another one with closed sides for your receipts, and make a habit of putting them away, they’ll all be there whenever you might need them.

If you can a) pay the balance in full each month, and b) only make purchases that you would have made anyway with cash or checks, and c) choose a card with a reward that really benefits you, then not only are you building a good credit file, you’re coming as close as it gets to beating the system.