Wednesday, December 12, 2012

Credit Cards for College Students

I remember having my first credit card when I was in my sophomore year in college. Until now, I am my mom's supplementary cardholder in a number of credit card companies. I use the credit card like cash but in very few instance. I also make it a point to pay for my monthly dues to maintain my good credit standing as recorded by the banks.

However, most people are not following the same practice. Research reports have indicated that most people who start using their credit cards early are those which incur very high credit. As they don't take this responsibility to pay for their debts seriously, their credit score is lowered and their credit history is adversely affected.

In this article, I'll talk you through financial basics related to maintaining habits of college students and any teenager in general, to ascertain good credit standing with the use of credit cards.

1. Register as young as you can as an authorized credit card holder.

From what I know, you can be a credit card owner when you reach the age of 16. So when you step into college, you may already use your credit card for store purchases. Having a registered credit card is a convenient way to buy stuff. But just keep your credit utilization low.

Don't tempt yourself to use your credit card as much as you can. You might not be able to pay for the debt later, if you won't ask money from your parents and you don't have a paying job yet.

Credit agencies analyze your historical credit record and you will have a better credit score if you have a longer credit history.

For example, once you turn 32 and you file a loan application, your application will have greater chance of getting approved when credit card companies see that you've been using your credit card and have been maintaining a good balance since 16 years ago. Hence you will be more trusted in their eyes to get their nod.

2. Track Your Expenses

Maybe I got this habit of tracking my expenses from my mom. Call me crazy or just too OC, but I keep an Excel spreadsheet of all the details of my expenses. In that file, I have one tab for the debits and credits of my bank accounts, reason for each entry (i.e. cash withdrawal for food, transportation allowance, house utilities, wardrobe, etc.), one tab to manage my budget (i.e. expected and actual savings and expenses for each month), one tab for the pending amounts yet to be paid to the bank (i.e. purchases from credit card/PayPal), and another tab to monitor also the different sources of income that are expected to fill the debit part of the bank account.

I update this file almost every day so I won't forget any cash in or cash out. 

3. Conduct Comparisons of Credit Cards

Credit card companies offer different schemes and promotions for every type of client they have. For example, Card A is best for frequent travelers as the use of credit card enables users to earn points or miles for their next flight; and Card B is best for shoppers as users can accumulate points to earn vouchers or get discounts in their next purchase.

When you approach the credit card company to apply for a credit card, read all the terms of the credit card schemes and promotions available and select the one that suits your needs. Also, check the interest rates (should there be) and the other points of the credit card.

4. Watch Out For Minimum Payments

As a teenager, you are not exempted to the rules of using a credit card. There are credit card companies that allow minimum payments to be made. However, it is not a good practice to always take advantage of this method. It's always better if you have a zero balance of credit in your account to have a good name. Pay your credit card bill in full.

5. Treat Your Credit Card as Cash

If you can't help paying the minimum amount allowable, push yourself to treat your credit card as cash. If you think you can't pay for the item, then don't consider using your credit card.

End Notes

If you are a teenager who wants to have your own credit card, be safe and protected by avoiding online scams in emails and websites. Do not every apply for your credit card on the web. Go to your trusted physical bank. Be wary of offers and claims of unknown companies. Else, your personal information may be put at stake and you may be charged with different amounts not spent by you but be put accounted for them.