Over the last few years there have been strict regulations put in place that restrict the presence of credit card companies on college campuses. This is in a response to the ever growing amount of debt that college grads are ending up with. Even though these restrictions have been put in place, the student credit card offers are still thriving and provide some great benefits for college students.
Credit cards can build credit, save money and teach students how to be responsible with their finances. This article will cover these topics and highlight the benefits of student credit cards.
Credit Cards Build Credit
We’ve all heard the horror stories about credit card debt. However, there’s a flip-side to credit cards that often gets overshadowed by the fear that is attached to credit cards. The truth is credit cards are an excellent way to build positive credit. If you manage your account right then you can reap the benefits of a strong credit history. Here are some of the things that you need to keep in mind when it comes to credit cards:
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- Make Payments on Time: You must make your payment on time. Your payments are reported to the credit bureaus and can significantly hurt your credit if you don’t make them on time.
- Stay Within Your Credit Limit: Don’t go over your credit limit. This is also you reported to the credit bureaus. It does not look good if you go over your limit or max your card(s) out. Your debt to credit ratio is a big factor in your credit score.
- Credit Inquiries: If you applied for or opened several accounts in a short period of time, it can affect you negatively. Each time you apply for a new account (even if it is to get an extra 10% off at the register) that inquiry is added to your credit report. Too many inquiries can bring down your credit score and raise an eye for lenders.
- Age Does Matter: The age of your account is an important factor because the longer your account history, the more information that is available about your habits. A long credit history gives lenders a better picture of your stability. Imagine opening a credit card in college and still having that account in good standing 20 years later.
When talking about building credit with a credit card, you also have to be realistic about the consequences of not managing your account right. Credit cards can build credit, but irresponsible use can also result in bad credit and a pile debt.
Credit Cards Save You Money
Many of us don’t associate saving money with using a credit card. Instead, we tend to think credit cards are the root of all evil and they only cost us more money in the long run. For some this is true, but for those that manage their account correctly by paying off their balance each month you can save money. Paying off your balance each billing cycle means you won’t be charged interest. When you combine this with using a rewards card then you are saving yourself money by using your card.
There are many great rewards credit cards specifically for students. Here are a few of my favorites:
Citi Forward® Card for College Students – This card actually rewards you for being a good cardholder. You earn bonus points when you stay under your credit limit and can even get your APR reduced by paying your bill on time. You also earn 5 ThankYou Points for every dollar you spend at places students shop like book stores, record stores, restaurants, including fast food restaurants, motion picture theaters, and video entertainment rental stores.
Discover® Student Card: This one makes the list because it gives 5% cash back in rotating categories each month like like gas, groceries, restaurants, department stores and more. It also gives a nice 0% introductory rate on purchases and has a low regular rate for those that qualify.
Credit Cards Teach Responsibility
There’s no doubt that credit cards are a great tool for learning how to be responsible with your finances. If you can start learning good habits while still in college then you are paving the way for a strong financial future. Credit cards teach you how to manage your money and allow you to create a good credit history in the process. We all know how important a good, solid credit history is and by creating the foundation for this early on it will help you achieve your financial goals later in life.