Submitted by Admin
As a new student, you might not have any credit experience. College is the perfect opportunity to change that.
Credit experience can help you in the future when you want to purchase a vehicle, rent an apartment or start a business on your own. It can also help you increase your credit limits, lower interest rates and add rewards to your accounts. But, before you sign up for a credit card, read these five practical credit tips first:
1. Figure Out How to Qualify
Students under the age of 21 cannot qualify for their first credit card on their own. They will need a co-signer in order to open up their account. Why? This is one of the limitations imposed in The CARD Act (2009) to protect young consumers from financial missteps.
A student under the age of 21 can also be added to their parent or guardian’s account as an authorized user. As an authorized user, you will have a personal copy of the card and access to the shared account.
2. Look for Student Cards
When you go shopping for your first credit card, make sure to look for the issuer’s student options. Student credit cards require little to no previous credit history to apply and come with minimal fees. Some cards have benefits that can be particularly appealing to students, like offering cashback from transactions made at grocery stores and gas stations.
3. Use Credit for Important Expenses
Ideally, credit should be used for important expenses that you can’t handle with your budget immediately, but you can afford to pay down later on. For instance, credit is an excellent tool for handling emergency expenses, like car repairs and urgent dental appointments. When you don’t have enough savings to cover these pressing expenses, you can put the charge onto your credit card and then pay down the balance later.
Your credit card isn’t the only credit tool that can come in handy for emergency situations. If you don’t have enough savings on hand, you could apply for a personal line of credit and see whether you get approved. A personal line of credit is an open-end credit tool that allows approved users to request withdrawals within their limit, which can then be deposited into their bank accounts in a short amount of time. Users can take those borrowed funds to cover an emergency expense and then follow a steady repayment plan to replenish the balance in their line of credit.
4. Take Advantage of Protections
Credit cards can offer you additional protections during emergencies. For instance, some cards offer travel protections when you use them to purchase airline tickets. These protections can include trip cancellation insurance, trip delay insurance and baggage insurance. So, if your card has this feature, you should use it whenever you need to book flights for term breaks and holidays.
Certain cards also offer a feature called purchase protection. Purchase protection helps buyers recover the costs of repairs or replacements for items that are damaged or stolen within the first 90-120 days after purchase. This protection can be especially useful for essential electronics like laptops and smartphones.
Of course, the best protection that credit cards can offer users is protection against financial fraud. The Fair Credit Billing Act (FCBA) ensures that users are not responsible for any fraudulent activity done with their credit cards, whether it’s with unauthorized purchases or accounts. At the most, users will have to pay a maximum of $50. Many companies offer zero fraud liability — meaning that their users will pay nothing after becoming a victim of fraud.
5. Pay More Than the Minimum
When you receive your credit card bill, you will have an option to pay a “minimum.” A minimum is the smallest amount of money that your credit card issuer will accept as a form of payment each month without incurring a late penalty.
It’s tempting to only pay the minimum in order to save money, but it’s not a good habit to keep up with. Your outstanding balance will continue to grow with additional purchases and interest over time. Your minimum payments will not help you keep up with this growth and give you a higher debt load to manage. It could easily get out of your control.
So, if you can pay more than the minimum by your bill’s due date, pay more. If you don’t, pay the minimum by the deadline. Once you have more funds available, use them to shrink your balance and keep it from growing past your comfort zone.
Use these practical tips to build up your credit experience. You don’t want to skip them.