Your credit card history can have a great impact on your credit ratings (credit score) which will in turn determine your qualification for future credit facilities. It is therefore imperative that you develop a good habit about credit card handling in order to maintain a good credit rating.
Sallie Mae reported that on an average a college student has four or more credit cards with a total balance of $3,000 and a credit card debt of up to $7,000. Financial houses, insurance companies, etc. will consider your credit rating before approving your application and also at what interest rate. Thus, having a high credit card debt or a history of payment default will negatively affect your credit rating and based on this, a bank may not grant your loan request, a landlord may deny you accommodation, and an employer may deny you a job.
Therefore your credit history is partly determined by how you use your card while in college. The following are tips to help you manage your credit card prudently and avoid a poor credit history.
When Choosing a Credit Card
Before you choose a particular credit card you have to consider the credit card issuers policies, credit limit, annual fee, annual percentage rate (APR), and other rewards attached to the card. This will help you choose the best card that offers you low charges and prevent you from going into debt.
Why Have More Than One Credit Card?
Many cards come your way as a college student but you must know that money on credit cards are not free, you will eventually pay back, and you will do yourself a great favour by limiting yourself to only one card. Your chance of accumulating credit card debt is directly proportional to the number of credit cards you have.
Can You Afford That Item Now?
If you think credit card is meant for items you cannot afford at the moment, then you might be accumulating debt for yourself. Only buy items you can afford and not what you think you can afford later. Spending beyond your credit limit may put you in debt.
Monthly Payment Is the Best
Always endeavor to pay off your balance at the end of each month when you receive your bill. This will avoid you paying for the extra fees charged by credit card issuer when you don’t pay in full. However, a credit card with a low APR will be an advantage in this situation.
Why Use Your Card for another Person?
Your friends/neighbors should have their own credit cards. When you allow them use your credit card, you end up paying at the end of the month even if that friend of yours refuse to pay you back (remember the best of your friends can disappoint you at any time).
If You Can No Longer Cope, Close It
Although closing your card may have a negative effect on your credit rating but it is better you close the credit card account, if you can no longer maintain it, as closing it will cause less damage to your credit rating than having a history of credit card default.
Following the above tips will ensure a prudent credit card management, prevent you from accumulating debt, and guarantees you a good credit rating (score).