Use Your Student Credit Cards Wisely
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by: barrywaters
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If youre like most people, student credit cards are the first chance you have to establish a credit rating. But student cards are harder to use wisely than regular cards: high interest rates, encouragement from credit card companies to splurge on yourself, and being offered credit during a time when youre likely to be broke all contribute to running up credit rating destroying levels of debt. Heres how you avoid that trap:
* Use your student credit cards as little as possible. Charge only what you can afford to pay in full at the end of the month, and try to avoid using your cards unless you are in an emergency. (Desperately needing a pair of cool jeans that are on sale is not an emergency.) You can establish your creditworthiness by making two or three small charges each month, and because you pay them off during each billing cycle, you dont accumulate debt.
* Pay off all your charges each month. As your unpaid balance climbs higher, you accumulate more interest. Eventually, you can find yourself unable to pay anything but the interest, with your debt shrinking so slowly that youll be paying it off for years to come. Over the course of months or years, youll pay more in interest on each of your purchases than you paid for the purchase itself. Rather than getting stuck in that trap, pay your entire balance on all of your student credit cards every billing cycle.
* Be punctual about paying your credit card bill, down to the hour. If your check or electronic transfer arrives at the credit card company even a day late (or, for some cards, an hour late), youll be hit with a late fee of $35 to $40. The company may also raise your interest rate by ten percent or more on the pretext that youve shown yourself to be a bad creditor and a credit risk. You know youre not a risk, you just forgot to drop the check in the mail, but that doesnt matter; the agreement you signed with the company says they can do it, and they will. So get your bills or electronic payments for your student credit cards on their way a few days early, and consider setting up automatic payments to be absolutely sure the money will be sent. If you realize youre going to be late, call the company immediately and see if you can make a rush payment. Rush payments cost extra, usually about $15, but they can preserve your credit rating. The money is credited to your account at once, letting you sneak in under the wire when theres no time for a regular bank transfer. If youre too late for a rush payment to get the money to the company in time, call them anyway and ask whether theyll forgive the late fee and the damage to your interest rate. Credit card companies will often cut some slack for customers who have an otherwise good history with them. Other articles Credit cards for bad credit | Low interest credit cards | Credit cards |
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