Getting a credit card when you are still a student is a great way of starting to build a credit history. A good credit history will give you a good credit score, which means that you will be more likely to get a loan with favourable conditions when you finish school and wish to buy a house, car or similar. Using your student credit card irresponsibly can however lead to quite the opposite – a ruined credit score that will take years to rebuild and a huge debt. A ruined credit score will not only make it hard for you to borrow money for larger investment such as a house, it can also effect your chances of renting an apartment, installing a phone without having to pay a large deposit and even to get a job since many companies perform credit checks on potential employees.
Start out by sitting down and creating a budget. It might seem boring, but making a budget can actually save you a lot of money in the long run. It is more fun to spend money on travelling or buying nice things than to spend them on credit card interests and transaction fees. Your budget should cover all your daily expenses, but you should also consider what to do when something unexpected happens. How will you pay for an emergency visit to the dentist after knocking out a teeth when playing basket? If it is possible, your budget should ideally allow you to save some money each month for emergency situations. Student credit cards are great for emergencies, but you must be able to pay of the debt eventually. Set your own rules regarding your student credit card. Which expenses will you pay with the credit card and what is better paid in cash? Small things, such as lunches and snacks, can quickly add up to large sums if you loose track of the cost.
The best way of avoiding student credit card problems is to decide from the beginning that you will pay of the full balance each month. This way, it is easier to resist the temptation to buy things you can’t actually afford. By paying your debts at the end of each month you can also avoid being charged interest, as long as you choose a student credit card with a one month graze period.
Compare several student credit cards before choosing one of them. You need to take many factors into consideration, such as if there are any transaction fees connected to the student credit card and for which type of transactions those fees will be charged. You should also always consider the annual percentage rate (APR), and be careful with introductory offers. Many credit card companies will offer you a low introductory APR, but since those offer typically only last a few months it is imperative ask about the regular APR. Also ask about the penalty fee for late payments and how long the grace period is, if there is a grace period at all.
You also need to know of there a risk of getting your interest rate raised dramatically if you violate the rules in any way; e.g. by exceeding your credit limit or paying less than the minimum amount one month. Naturally, you should not apply for a student credit card only because they are giving away promotional prizes such as t-shirts, sunglasses or other gadgets.
Always pay you student credit card bills on time, since being even just a few days late can cost you money in fees and ultimately harm you credit score. Ideally pay a few days before the due date, since payments can become delayed due to factors beyond your control and finding out who is actually responsible for this and having your fees cancelled can be a hassle.
Make a habit of reading your student credit card statement as soon as it arrives each month. This way you will rapidly find out if something is wrong. You will also keep track of your spending and can cut down on your expenses for the rest of the month if you notice that you are required to pay a larger credit card bill than usual. Go through all the charges and make sure they are all yours. Also check if the interest rate is the same as usual, if you have been charged any fees and why, and if the balance is going up or down.