Youve just peeled your very first student credit card off the acceptance letter, shiny and clean and all yours. It comes with all kinds of incentives to use it: rebates on gas, cash back on purchases at the right stores, maybe even a points system that can add up to free checks in the mail. Whats not to love? Why not take your student credit cards on a spending spree right away?
Before you put any new student credit cards through their paces, think twice. According to a federal report, the average student in New York state has four credit cards and has $3,173 in credit card debt. Thats on top of any tuition debt they may be carrying, and is likely to have an interest rate higher than the national average. Its a heavy burden to bear when youre fresh out of college and still looking for a good job. And it doesnt take big purchases or heavy spending to rack up. $3,173 is barely $793 a year. Thats $66 a month or $15.25 a week. Spend one evening at the bar, or buy a few CDs, or charge a couple of your books for the semester, and youve added that much to the debt youll be working for years to pay off.
Is there an escape? Of course. Use student credit credit cards sensibly. Use these rules as a guide:
* Dont carry a balance from month to month. You do need to use your credit card to build your credit history. You dont need to carry a balance.
* Charge only the essentials. Credit card companies encourage you to think of credit as play money, but youll need to pay for your play eventually. Put an item on your card only when you know you need it and youll be able to pay off the credit card in a month or two.
* Dont let the promise of rebates or points sway you to charge more. Its tempting to spend a few more dollars so youll earn enough for a rebate check, but the interest youll pay will cost you far more than the rebate check is worth. (Thats why they have rewards programs.)
* Avoid extra fees by paying your credit card bills on time every month. The average late fee is $35, and too many late payments will allow your credit card company to raise your interest rate steeply. Dont start down that spiral! If getting bills in the mail on time is a problem for you, automatic payments can be a lifesaver.
Use your student credit cards wisely, and youll leave college with good credit and no credit card debt. Youll find it infinitely easier when you buy a house, rent an apartment, and establish yourself in the world outside college. Reference Bad credit credit cards ... Credit card application ...