As a freshman, life has been pretty crazy for you since you first step foot on the Hilltop almost a month ago. Between orientation events, club fairs and adjusting to college courses, you have a lot on your plate, but the good news is, you’re already learning so much. However, your wallet may not be as happy with your college experience as you are so far. Why does everything seem so expensive in Georgetown? Why does every trip out to D.C. seem to cost you an arm and a leg?
Maybe it’s time to start considering better ways to finance your college adventures. A college credit card is a great place to start, and college can be the perfect time to begin building your credit and taking advantage of student deals offered by credit card companies. Managing a credit card is not as hard as it sounds, and if you only have one card, it is much easier to handle your finances. Building a credit score now is important because you may need one when renting an apartment or applying for loans. Future employers may want to check your credit history as well. Your adult self will thank you in the future for the smart steps you’re taking today!
How Does a Credit Card Work
You may have already had some experience with a debit card. With a debit card, when you want to purchase something but do not have the cash to pay for it, using your card will automatically withdraw funds that you have in your bank account to pay for your purchase. Credit cards work slightly differently. Instead of taking funds from your account, your credit card company will be charged. In turn, your credit card company will bill you on a monthly basis. You may be thinking, “I’m already paying for the items anyway, so why add another step to the process?” The answers are simple — credit cards are convenient, you’ll earn rewards for spending money, and you can build your credit score.
How to Use Your Credit Card to Your Advantage
While adding another responsibility to your life right now may not seem ideal, having a college credit card may help you both right now and in the future. For one, it is extremely convenient. You can pay for all your essentials with a credit card, including groceries. You can also link your card to your Uber, Lyft or Amazon accounts. ValuePenguin.com offers a great guide for college students to compare the best student credit cards, which offer different cash back rewards when you make certain purchases such as meals at restaurants and transportation. When you spend money in specific categories, you will get rewarded with cash back that you can use to redeem deals or pay for purchases on online websites such as Amazon. Rewards vary by the credit card company, so it is important to do your research beforehand.
The Best Credit Card Habits
You have probably heard horror stories of getting trapped in cycles of debt with credit cards. Well, there are plenty of ways to be smart with your credit card. You should only use your card on purchases you can afford in reality. Your credit card will come with a maximum line of credit, which is the largest amount you are allowed to spend on total purchases. This amount will replenish every time you pay back the amount you owe. A general rule of thumb is that you should never get close to spending your maximum line of credit! If your line of credit is $1,000, try limiting yourself to spending $300 on your credit card per month. Another habit you should get into is to keep track of your monthly bills. Luckily, you can set monthly e-mails to remind you to pay off your balance. Paying the full amount you spent during the month in a timely manner is the key to building your credit.
Disclaimer: Nina Cheng is a summer research analyst at ValuePenguin.com.
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