Credit cards of are kind of scary. A little terrifying if you really think about how much trouble you could get into if you aren’t careful. Factor in the unfair truth that it is going to be really hard for your post graduation if you have no or bad credit. The stakes are high.
The good news is that using credit responsibly isn’t that hard. There are different ways you can deal with using a credit card to build your credit score. The most important strategy is to always remember the difference between needs and wants. Starting a tab with your credit card Uptown is a recipe for disaster (seriously don’t take your card to the bars, you’ll be sorry).
Many people choose to use their credit for a particular, but small expense each month and then pay it off. If you’re one of those rare gems who pays for Netflix, or Spotify Premium this might be a good thing to try. Other people get gas using their card, but this could quickly rack up a bill that you don’t want to pay all at once.
And that’s the major key here – paying off your balance on time each month. Sometimes it’s fine to make smaller payments but getting into the habit of paying the minimum can cost you a lot of money in interest and a lot of aggravation in the long run. Interest is the fee that you pay your company for borrowing money. Interest is charged as a percentage, so the cost will vary every month depending on your card’s balance.
The first time you apply for a card, make sure to do research and compare a few cards. Discover, American Express, Chase and various other companies all have pros and cons. From personal experience, Discover has really great customer service and Chase is a nightmare to deal with which is why I never recommend an Amazon card to anyone. Companies like Discover also offer some reward programs, even for students. If you’re interested in cash back, rewards, miles for flying, those could all be factors in the company you choose.
Be wary of high interest rates with your first card. Also try to avoid signing up for more than one or two cards to avoid having numerous inquiries on your credit report. A lot of inquiries become a red flag for future creditors. Remember the name of the game is to look like a reliable, responsible borrower.
In the long run, having a high credit score is very helpful. You can get auto loans (which are also something you need to be really careful with – hello, deppreciating asset), home loans, and other credit lines that you might need to start a business or in the case of a personal emergency. Some employers will even look to your creditor for an indication of the type of person you are. It’s not always fair, but it’s best to know how to use all the tools the adult world will throw at you. Credit is one.