6 Credit Card Mistakes Students Make (and How to Avoid Them)
Beth Kotz
A college education grants students a wider range of career opportunities and opens the door to a brighter future. Beyond the classroom, it’s also a time to gain a deeper understanding of adult privileges and responsibilities. One of the biggest privileges afforded to college students is the chance to open their first line of credit. With that, however, comes the responsibility of establishing a strong personal credit history and not sinking deeply into debt.
For many this can be a challenge. Here are six credit card mistakes students often make and some actionable tips as to how they can be avoided.
Choosing to Ignore Their Debt
For a college student strapped for cash, a credit card can seem like a dream come true. It basically lets them spend money freely, or so it would seem. New credit card users might not realize the ramifications of making their debt an afterthought. They might just pay the minimum owed every month, not realizing how quickly interest rates can snowball. The best way to avoid this is to pay your credit card off every month and to only use it in times of financial emergency.
Incurring New Credit Card Debt
Bigger is better, right? Well, that’s true for some things, but certainly not credit card debt. The more money you owe, the worse your credit score is going to be. If you’re borrowing large sums of money and paying them back immediately, then you’re fine. However, many credit card users borrow more money than they can ever dream of paying back (at least in the immediate future). The best way to avoid this is to use foresight and don’t spend more with a credit card than you’ll be able to pay back.
Missing Credit Card Payments (Or Making Them Late)
Let’s make something abundantly clear: credit cards are not free money. You might be able to borrow money from your parents or friends and get away with not paying it back. However, creditors have a business to run and aren’t going to be forgiving. Fortunately, it’s easy to find your payment due dates and make them online. Missing a credit card payment, even by a day, can have serious consequences. You’re likely to be hit with late fees, higher interest and have your monthly minimum payment amount increased. Fixing credit due to missed payments can be an arduous task. The best way to avoid this is to make your payments on time and set a reminder on your calendar if necessary.
Co-Signing an Application with a Friend or Significant Other
By co-signing an application with a friend or partner, you’re putting your credit rating at the mercy of another person, which is a surefire way to get bad credit. So, while you might be responsible and make payments on-time, it won’t matter if your best friend is a reckless spender. The best way to avoid this is to never cosign a credit card application, at least not as a college student.
Paying Tuition With a Credit Card
Of all the expenses college students have to deal with, from textbooks to meals, tuition is likely to be the biggest. While you might think that paying your tuition with a credit card is a smart decision, reading the fine print on your card agreement will show you why it isn’t. Compared to student loans, credit cards are much less flexible and can have higher fees. Student debt enough of a pain. You don’t want to make it worse. The best way to avoid this is to have a game plan for paying tuition and only use a credit card for a modest portion of your tuition (if you must).
Ignoring Credit Cards Altogether
It wasn’t our intention to scare you off credit cards for life. Credit cards are wonderful, if used correctly. If you vow to never use a credit card ever, you’re jeopardizing your credit score by virtue of not getting one in the first place. You don’t need to sign up for ten high-interest credit cards and buy a dozen yachts. Just look into student credit cards, find one that suits you, and use it in a responsible manner. Proving you know how to use a credit card responsibly will have huge benefits for your adult life.
The power of a credit card is immense – it can help in a jam and aid in achieving much bigger goals. However, if not used correctly, it can hold you back from loans, mortgages, and even job opportunities. As a student, you can start your path to adulthood off right by using a credit card with care and responsibility.
Beth Kotz is a contributing writer to Credit.com. She specializes in covering financial advice for female entrepreneurs, college students and recent graduates. She earned a BA in Communications and Media from DePaul University in Chicago, IL, where she continues to live and work.
