Apartments and cars and jobs… Oh my! They all are impacted by your credit. Unfortunately, many college students are graduating with more than just a degree – they are leaving with credit card debt. But don’t tear up the credit card offers yet.
A credit card is often a good way to start building your credit score. Credit cards can be easier to get, and generally, as long as you pay off your balance each month, you will not have to pay any interest.
*If you are under 21, you cannot get a credit card unless you can demonstrate you possess an independent means of repaying balances (such as a job) or have an adult co-sign for you.
When deciding on a credit card, note and compare the important features:
This is the interest that you are charged on any balance that you carry-over, or do not pay off each month. You want to look for a card with low APR. If the card comes with a teaser rate, check what the interest rate will be once the teaser rate expires. It could be much higher than for other cards.
The credit limit is the maximum amount you can borrow at any given point in time. Having a higher credit limit is better for your credit score, but if you are worried you will overspend, it may be a good idea to look for a card with a lower limit.
A grace period is the window of time, usually 21 to 30 days, between the cut-off of your billing cycle and your payment due date. Normally, if the balance is paid in full by the end of the grace period, no interest is due on the new charges. This doesn’t apply to cash advances, where interest is applied immediately.
Most cards charge a fee for a late payment or going over the limit. Some also charge an annual fee. It is best to avoid these, but if you are new to credit, you may not have a choice. However, if you use your card responsibly for a year, you may be able to have the annual fee reduced or eliminated.
Give your future self the best chance of success with a good credit score. Adulting is already complicated enough without having to battle poor spending choices from your college years.
For more information on our Youth Education Series, please check out:
BALANCE is an amazing resource for all our members to utilize when taking on life's milestones. With trusted guidance available for free, they are ready to help everyone on the path to financial wellness. This article and many more can be found on their website: balancepro.org.
Youth Education Series Part I – Dealing with Student Loans
Youth Education Series Part II – Preparing to Move Out
Youth Education Series Part IV – Student Loan Scams: Three Red Flags to Avoid
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