The college years are when many people get their first credit card… it’s also when an unfortunate number of them start racking up credit card debt! As tempting as it can be to spend now and pay later, it’s one of the worst mistakes you can make—worse than flunking an exam, streaking naked with the debate team, or dumping a pitcher of beer on your roommate’s head.
Why? Because unlike those mistakes, there is no such thing as a do-over or foolishness fading from memory over time. Credit card problems can follow you forever.
One of the reasons good credit card management is so important is because of your credit rating. Every time you miss a payment, your credit rating goes down. Having a good credit rating is important for renting apartments without a co-signer and, later in life, purchasing cars and houses.
While you might not feel that buying a house is very important to you right now, trust me—someday when you have an active toddler jumping around an apartment and no backyard, you’ll feel very differently! If your credit rating isn’t good enough to qualify for a mortgage, you’ll be wishing for a time machine to go back and give your college self a piece of your mind. That’s not all a strong credit rating is good for, though—some employers look at them, too.
So how can you get a credit card, start building your rating, and also stay out of trouble? Follow these simple guidelines:
• Use a credit card to build a credit rating and make your finances convenient to track, not to purchase things you cannot truly afford. Pay your balance in full every single month. Otherwise, you’re throwing money away because those interest fees add up like a Jenga tower in the blink of an eye.
• Pick a credit card based on interest rates and other financial interests, not pretty display, sign-up freebie, or cute credit card company employee. Any information you could want about potential cards is available on the websites of the companies offering them. Look for a card without an annual fee, the lowest interest rate you can find, and a modest limit—that way, even if you go on a drunken eBay spree, you won’t ruin your finances forever. On the same page, limit yourself to a single card. Until you’re making money at a full-time career, there’s just no reason for multiple cards.
• Do not, for the love of education, take out cash advances on your credit card. The fees for doing so are high and the overall benefit is low. If you don’t have the money, you don’t have the money.
• Read every single, boring word the credit card company sends you. Assume that the higher the rate hike or transaction fee, the tinier the print! Credit card companies change terms all the time, and they don’t need your permission. Don’t let them slip anything past you.
• Keep an emergency fund. If you can keep $1000 or at least several hundred aside for any kind of true emergency, you won’t risk going into debt when one comes along.
• Don’t ever—and I meant EVER—let a friend use your credit card. It doesn’t matter how good of a friend they are, how much your trust them, or how minor a purchase they want to make. Down that road lies ruin, and no credit card company will have sympathy for, “my friend promised to pay me back!” It’s 100% on you. You can, however, share what you’ve learned about credit cards from researching the best choice for you to help your friend apply for their own.
If you end up getting into trouble despite your best intentions, do yourself a favor and cancel your card. Cut it up and throw away each piece in a different garbage can. A bit of bad credit is better than a lot of bad credit. Admit you aren’t ready for the responsibility and try again after college. And just remember…there’s no such thing as free money!
Elisabeth Bailey is a freelance writer and editor with particular interests in academics, food,and sustainability . She is also the author of A Taste of the Maritimes: Local, Seasonal Recipes the Whole Year Round and writes regularly for Canadian Farmers’ Almanac and the National Wildlife Federation. Elisabeth and her family live and enjoy great local food in Lunenburg, Nova Scotia.
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