Here's what you need to know about your credit score

What college students need to know about credit cards

Even if you don’t have cash on you, it’s easier than ever to pay – with credit cards, debit cards, Venmo, Apple Pay and many other options.

When you’re in college, credit cards provide a security that allows you to pay even if you don’t have money in your wallet. Unlike some newer payment methods, they are accepted almost everywhere. They are essential for online purchases. And, they’re a great way to start building your credit history.

“A credit card allows you to make purchases without carrying cash,” said Baker Lee, founder, owner and president of Apex Financial Services. “Using a credit card in hotels and car rentals is a big advantage because it doesn’t take up Extra cash, and when you’re young, there can be a shortage of cash supply.”

“[Credit cards] Lauren Chin, a junior at the Maryland Institute of Arts, said:

Lauren Chin, junior at Maryland Institute of Art, majoring in Illustration

Source: Lauren Chin

Having a credit card is also helpful when you have an emergency.

“[Credit cards] It definitely comes in handy when there’s an emergency that exceeds your available cash,” Lee said. “Imagine, if you will, you’re traveling and having a car breakdown. Having a credit card allows you to repair your vehicle and pay it off later. “

build your credit

More importantly, a credit card is how you start building your credit and credit score. If you use your card every time and pay your bills on time, it shows the financial institution that you are responsible for your money. The more responsible you are, the higher your credit score will be.

Payment history is probably the most important component in determining your credit score. Other factors include credit utilization (the percentage of your actual credit limit that you use) and the length of your credit history. So, that’s why having a credit card in college is helpful, because the sooner you start using it, and use it responsibly, the longer (and stronger) your credit history will be.

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You might not care about your credit score when you’re in college, but it becomes more and more important in your adult life. Whether you’re looking to buy a car, condo, home, or other big-ticket item that requires a loan, financial institutions that offer loans will look at your credit score and your credit history to determine if you qualify for a loan.

Ask yourself this question: If you just charged a charge on your credit card and didn’t pay it back when it was due, why would someone else risk lending you money?

It’s not free money

While having a credit card can be beneficial in many ways, it can also be a slippery slope if you use it irresponsibly, leading to a buildup of debt.

“Just open [a credit card] Early in your life, but not until you’re ready to take on financial responsibility,” says certified financial planner and four-time Olympic athlete Lauryn Williams.

When you’re considering opening a credit card, Williams recommends asking yourself these questions: Do I understand what a budget is? Do I understand what a credit card is? Do I have a good understanding of my financial situation?what [are] my expenses? What am I going to do with this credit card?

You must pay attention to the fees you are charged and what the balance is, making sure you have enough money to pay off the balance when it comes due.

If you end up with a balance on your credit card, it will accrue interest at a very high rate. According to recent Federal Reserve data, the average interest rate on credit cards is close to 17%. And, that’s only going to continue to snowball: Next month, you’ll not only be charged interest on what you owe, but what you’re adding to your balance now. Compound interest is the same principle that can help you grow your money in a savings account, but can work against you a lot when it comes to debt.

And if you don’t pay your bill or pay less than the minimum amount due, you’ll face late fees, which could be $25-$30, among other things.

“I try not to use too much, and then pay the bill in full when it’s due,” Chin said.

Paying less than your interest amount may also result in an increase in your monthly interest rate charges. The worst-case scenario of continued consumption without repayment can lead to debt.

“You can say, ‘Oh, I’ll pay later,’“Then you’re stuck with monthly payments, you’re stuck paying interest, and you can pay [item] cash, or decide not to buy because you can’t afford it. “

It’s important to note that just because you qualify for a $10,000 or $20,000 credit line doesn’t mean you should use all of them. In fact, you should definitely not use all of them because your credit score is based on the credit utilization rate you want to keep low. Credit card companies won’t shut you out just because you missed a payment or owed money. When you have a balance, they make money from the interest charged to you and any late fees you accrue. Therefore, as a credit card holder, you need to make sound judgments when making purchases.

It’s easy to be in debt — but when it starts to pile up, it can be frightening. Of the 500 Americans surveyed by Credible, 33% said debt is the most terrifying aspect of their lives—even worse than death.

According to, the average college student has more than $3,280 worth of credit card debt.

So if you have a credit card, it’s important not to treat it as free money. Be sure to know what your interest rate is. (Many people don’t.) Pay your bills in full and on time each month. And always make sure you don’t spend more than you actually spend. If things start to pile up and you can’t pay your bills, take a minute to regroup, stop spending at a pace you can’t handle, and make a plan to pay it off.

pay off your debt

So, somehow, your spending disappeared from you, and now you have a lot of credit card debt. How to do?

First, you should stop spending on the card as much as possible. Next, make a payoff plan. Set a time frame for how much you pay each month and how long it will take to pay it off — and stick to it. If it takes a long time for you to pay off, you might consider a credit card offer at 0% APR (usually around 12 or 15 months). This will help you stop accumulating interest charges. However, you should note that there is usually an additional fee (usually around 3% to 5% of the balance) and then 0% APR after that, no matter how many months. For example, if your balance is $3,000, you’ll be charged a fee of $90 to $150. So factor it into your decision – and always pay attention to the fine print. Zero percent sounds great, but zero doesn’t always mean zero when it comes to credit cards.

If you have more than one credit card balance, there are several ways to manage and pay off your debt.

Williams explained that the two most popular ways to pay off credit card debt are to follow the “snowball method” or the “avalanche method.” In the snowball method, if you have multiple credit cards with debt, you pay off the card with the lowest balance first. This quickly takes a card from your hand and gives you some momentum. With the avalanche method, you pay off the card with the highest interest rate first, then work your way down until it’s all paid off.

Don’t sacrifice your savings

While paying off debt is critical, it’s also worth making sure you’re still paying your essential bills — and building emergency savings.

Emergencies don’t wait for you to pay off your debt! They can happen anytime. This could be car repairs, a new laptop, or unexpected medical bills.

“It’s important that you don’t sacrifice your savings when you’re paying off your credit card debt,” Williams said. “What if you had another emergency while trying to pay off your credit card debt?”

So when you’re planning, make sure to allocate a portion of your budget to your expenses, some to pay off debt, and some to save for emergency.

Debit card or Venmo as an alternative

Debit cards and payment apps like Venmo can help you avoid overspending.

Because they’re tied to your bank account, you can’t spend more than you save. And, you can also record everything you spend in one place, so there’s no need to make a separate expense tracker.

These are great options if you think you’re prone to overspending — or if you’re already in debt on your credit card. However, be aware that there is a risk: because they are tied to your bank account, if you lose your card or someone fraudulently obtains your account information, you run the risk of someone withdrawing money directly from your bank account. Unlike credit cards, if there is a fraudulent charge, you can report it to your credit card company and the credit card company will investigate it for you for free. However, most financial institutions do take significant steps to protect customers from fraudulent activity, so this should never happen. One thing you can do is set a daily withdrawal limit on your bank account so that no one can withdraw more than $300 in one day. This will help limit losses and protect your funds.

track your spending

It sounds simple, but it’s important to remember to track your spending to make sure you don’t spend more than you actually spend.

“I recommend that college students think of their credit cards as a tool to build their credit score and have them keep track of where their money is going so they know how much they’re spending at any given moment,” says Jane Lee, a 2022 graduate of Boston University.

Jane Lee, Research Assistant in the Poduri Laboratory at Boston Children’s Hospital, just graduated from Boston University

Jong Jin Lee of Say J Studio

If debt starts to pile up and you keep your balance, don’t blame yourself — we all make mistakes. Instead, take control of it quickly and make a plan to pay it off. Then start building better spending habits.

“Use your credit card wisely can lead to a higher credit score, which means a lower deposit for renting your first apartment, no deposit for utilities, and even access to cell phone service,” Lee said.

“For any parent who might be reading this, you might consider adding your child as an authorized user of one of your credit cards,” Lee said. “It gives them some extra freedom, you can monitor your kids before they go to college, and as long as you manage your credit cards yourself, you can give them a head start on higher credit scores.”

University Voice‘ is a guide written by college students to help young people understand important money issues such as student loans, budgeting and buying a first apartment. Sophie Kim Is an intern at CNBC Specials. She is currently a junior at Boston University, studying journalism and public relations.This guide is provided by Cindy Perman.

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