College is already hard enough as it is. Why would you even think about something like a student credit card to add to the number of things you have to be responsible for? Well, just like your degree will be a part of you long after you graduate, so will your credit score. A student credit card can be your ticket to graduating with an excellent credit score, which will leave you with plenty of handy financial options.
Just like your grades are a reflection of how well you’re doing in your classes, your credit score is a grade on how well you pay back money that you borrow. When you spend with a credit card, you are spending a credit card company’s money and paying it back at the end of the month. If you are responsible and pay back the money you spent on time, then your credit history will reflect that you are financially responsible, and you will be on your way to increasing your score.
Why do I need an excellent credit score?
This is a great question, because you probably don’t need an excellent credit score right now. But once you graduate, you may want to apply for a mortgage or get a loan for a car, and your credit score will come into play. If you have no credit history or a poor credit score, you could be denied when you ask to borrow money. Or, if you are approved, your interest rate could be sky-high, and it will cost you a lot more money than it should.
What are my choices?
The best choice, as far as credit cards for students, is any credit card. It doesn’t have to be a student credit card; most students do not have any credit history, which can make qualifying for a credit card difficult. Student credit cards cater to people who are in college that might not have a credit history. Therefore, they can’t get approved for a regular credit card. Student credit cards usually come with a low credit limit and tools to help their users use them responsibly. If you already have some sort of a credit history and can get approved for a regular credit card, then go ahead and get one. A great free option that matches you with targeted credit card offers based on your credit profile is the Card Match Program. This way, you can see what cards you are most likely to get approved for and avoid just applying blindly.
Be responsible:
It’s important to note using a credit card to establish credit doesn’t mean you have to spend a lot. As a student, you can just put a couple tanks of gas on your credit card a month and pay it off on time (and hopefully in full to avoid interest), and you’ll be on your way to a great credit score. If you miss payments and rack up interest and debt, you will be doing major damage to your credit history. You will actually be worse off than not getting a credit card at all. Use a student credit card only to spend money you know you have the funds available to pay back at the end of each month.
A great way to look at a credit card is to view it like a debit card. You wouldn’t swipe your debit card if you knew you didn’t have enough money in your account. So don’t use your student credit card if you don’t have the money to pay it back. Being a college student means you have to spend money for everyday things that you need. Utilize a credit card to do just that, and you will be on your way to an excellent credit score and have all the financial options you will need available to you when you graduate.
Matthew Coan is the owner of the Gainesville-based financial education website casavvy.com. Contact him at info@casavvy.com with any financial questions you may have.
