Once you start college, you'll enter the adult-world in many areas, including the world of credit. Today, companies offer credit cards specifically designed for you, the college student. And while these cards give you a chance to access and manage a line of credit, they also have potential downfalls.
The biggest potential downfall is, of course, the danger of falling into debt problems. If you graduate with a sky-high balance that you are unable to pay back, you'll be in danger of receiving a low credit score. And having bad credit is worse than having no credit at all.
That said, having a student credit card can be extremely beneficial. When used properly, it can serve as a tool to help build up your credit before you even finish school. Here's a look at student credit cards and how they work.
Different from the Rest
Student credit cards are designed for individuals that are just starting out in the credit world. Most of them come with a lower limit than other credit cards. Some of them require a parent or other adult to co-sign. Many let you sign up even if you do not have a regular income.
Student credit cards also often come with benefits that are geared toward the college lifestyle. They might include a rewards program based on your GPA or let you earn points when you purchase gas. Others will offer incentives such as going to an MTV event or airline tickets.
How to Use Them
Student credit cards can be a great item to have in your wallet when used properly. The first step toward wise management is to figure out what the card will be used for. You may decide to buy books and school supplies with it. Or you might want to hold on to it for emergency purposes. Once you establish guidelines on how you'll use it, try to stick to them.
When you do use the card, remember that you are actually taking out a loan. Whatever money you spend with the card will have to be paid back. So before you swipe the card, it's important to make sure you know how you'll repay the credit company. When you receive a statement at the end of the month, try to pay at least the minimum amount due. Whenever possible, pay off the entire balance right away.
What to Watch For
Many news headlines tell woes of college students that run up credit card debt. To avoid this scenario, read the fine print carefully before signing up. If you're worried about falling into debt problems, look for a card that comes with a low credit limit. If you end up with a high balance on one card, do not apply for another one until you pay off the entire amount due on the first one.
Use your student credit card wisely and you'll be rewarded in many ways. You'll have access to credit in case of an emergency, and a helpful financial tool for purchasing books and other school-related gear. When you graduate, you'll already have an established credit history. And you'll be on your way to a bright future in the credit department.
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