subject: What Students Need To Know About Using Credit Cards [print this page] 18, 18, 18, it's that age that we all wait for! The age when a boy becomes a man and a girl becomes a woman in the United States. Many of these men and women choose to go to college to further their education. However, for some, surviving on grants, student loans and scholarships alone just isn't enough. Having to get part time jobs to barely scrape by, many students find comfort in the financial cushion that charge cards provide. However, this is the age in which establishing credit and using charge card accounts responsibly is more important than ever. With that said, here are a few tips for students when it comes to using their first credit card account the right way!
Tip #1: The first tip that I can give to students when it comes to the proper use of credit cards is to never spend more on their credit card account than they can afford to pay back. Overspending on credit cards is the leading cause of financial hardship in the United States. Although, sometimes charge card companies will give high credit limits to consumers, it doesn't always mean these Americans should use the whole line available. It is important to remember that every time you slide that charge card across that machine, you are taking out more and more debt that eventually will need to be paid back. This leads me to tip #2!
Tip #2: The second tip that I can give to students when it comes to the proper use of charge cards is to keep their debt at 49% or less of the credit line. A credit line on credit card accounts is the amount of cash that particular consumer will be able to borrow in total using the charge card. Consumers conscious of their financial conditions tend to leave at least 51% of their credit line open for emergencies. Therefore, by spending more than 50% of the credit line available on credit cards, students may be showing lenders that they are either irresponsible borrowers or entering into a financial hardship situation. Either way, this increases the risk to financial institutions and can harm credit scores after prolonged periods of time.
Tip #3: The third tip that I can give to students when it comes to the proper use of charge cards is to double the principal payment. I know, to most of you reading this, that's gibberish. When the monthly statement comes for a charge card account, the payment will be broken into 2 portions, the principal payment (amount going to the balance) and the interest payment (amount charged by the financial institution). It is a best practice to send at least double the principal payment plus interest. This added payment with show credit card companies that the student is a mature borrower and may be less of a risk to them in the future!
Tip #4: There are no excuses for late payments. I know as young adults you don't want to hear this. However, remember when Mom and Dad would say no-excuses? Well, credit card companies take this statement to the extreme! There are no excuses to be accepted for late payment so always try to send payments at least 2 weeks early!
