Only 23 percent of college students have a credit card, according to a recent study. Sixty-two percent of those students used credit cards to build credit. Unfortunately, credit cards are easily misused by young adults.
“There’s a myth that credit cards cost money or are expensive because of credit card interest, but as long as they’re used responsibly and paid in full each month, regular credit card use and re-payment can be a free and easy way to build good credit history,” said Jacob Lunduski, director of community outreach at Credit Card Insider.
Building credit responsibly is the goal. Here is how to do it:
1. Credit Card Insider advises students to do research.
There are numerous types of credit cards, and it is important for college students to be smart and do their research. Do not get trapped with a card with high interest rates and high balances where you can get into deep financial trouble.
2. Credit Card Insider has a list of their top recommended credit cards for college students. They are based off of gas, restaurants, rewards, grocery stores and more.
There are credit cards that are better suited for American students as well as international students. The Deserve Edu Mastercard is easier for international students to get because it does not require a social security number, security deposit or co-signer to apply.
3. Building credit as a student is important. Your credit history will have an impact on your future. Having bad credit can make it difficult to get more credit cards, get a mortgage or auto loan, rent an apartment, find employment, get cell phone plans, pay for utilities, find insurance coverage and more, according to Credit Card Insider.
4. Remember: Building credit with a credit card does not need to cost any money.
The most important thing in regards to credit cards is to pay bills on time every month. Late payments stay on credit reports for up to seven years, according to Credit Card Insider. By paying in full, it is possible to avoid credit card interest completely.
5. Do not make mistakes by accumulating debt.
Make sure you understand how credit cards work before signing up for this responsibility.
According to a survey by Fidelity, “25 percent of students who graduated in 2013 carried credit card debt with them, at an average of $3,000 per graduate. This is very high, especially considering that most students (70 percent) who graduated that year also left with student loan debt, at an average of over $35,000.”
6. According to Credit Card Insider, it is best to start out with a credit card solely used for building credit.
This means using it for smaller purchases that you can go home and pay off immediately rather than expensive things that you will go into debt for because you do not have the money for it at the time.
7. Finally, Credit Card Insider advises always paying bills on time to avoid debt and a bad track record that follows you for years, keeping your utilization low to maintain low balances across all of your cards as close to one percent as possible and not applying for numerous credit cards at one time, as this can negatively affect your credit score.
Credit Card Insider has a page specifically for students that talks about using credit cards responsibly to build credit and common student credit mistakes, along with more information and explanations. They also have an in-depth comprehensive guide on their website that covers more for anyone looking to build credit with credit cards.