What New College Students Should Know About Credit Cards

New college students often find it easy to get their first credit card. They’re likely to get letters and emails from banks, offering them credit cards. And having easy access to credit may be tempting.  

But are college student credit cards worth it? They can be a valuable tool, or the first step toward debt that can be hard to dig out of. The Financial Counseling Association of America reports that college students who carry a balance on their credit cards owe an average of $2,088. 

These credit card tips can help students weigh the pros and cons and learn how to use credit responsibly. 

The Benefits of a Credit Card as a College Student 

Having a credit card when you’re in college can be helpful in a few ways. 

Building Credit 

A credit card can be the first step toward building a good credit score. The Insurance Information Institute reports that a good credit score can be useful when you want to: 

• Rent an apartment
• Turn on utility services like electricity, natural gas and internet
• Get a loan for a car or house
• Apply for a job
• Save money on auto or home insurance

Easier Approval Process 

It may be easier to get approved for a credit card when you’re in college, and if you apply online, you might get an instant decision, according to Bankrate.  

Learning to Handle Finances 

Managing a credit card can help you understand financial responsibility. You’ll learn to pay bills on time and live within a budget. 

Preparing for Emergencies 

As long as you keep your balance low, having a credit card means you have access to funds if you need them. So, for example, if you need to take a Lyft or Uber home late at night and you’re low on cash, you could use your credit card.   

Credit Card Mistakes College Students Should Avoid 

While there are benefits to credit cards, you need to be careful. Watch out for these student credit mistakes. 

Paying Late 

Life as a college student can be busy, and most of your expenses might be pay-as-you-go, not monthly bills. Paying on time makes a big difference in your credit score, so set up a system that helps you remember. You can opt in to text or email alerts from most credit card companies or set a reminder on your calendar. 

If you have trouble remembering to pay, you can always make a payment soon after you make a purchase. You don’t have to wait until the bill is due. 

Carrying a Balance 

Student credit cards often have high interest rates, so if you’re not paying off your credit card in full every month, you’ll pay a lot extra. Plus, if you’re not paying off your balance and you’re using the card every month, your balance will keep growing.  

Using Too Much Credit 

You might get a credit card with a limit of $500 or $1,000. It’s not a good idea to get close to your limit. That’s because of something called credit utilization, which is the percentage of your available credit you’re using.  

If you’ve charged $500 on a card with a $1,000 limit, your credit utilization is 50%. Ideally, keep your credit utilization to 30% or less, since it’s factored into your credit score.  

Learn More About Smart Financial Steps

As you make your way through college and into life as an adult, you’ll need to make more decisions about your money. It’s not too soon to learn about things like insurance and financial planning. Reach out to Farm Bureau and learn what you can do as a young person to set yourself up for a prosperous future.