Avoiding Credit Card Woes
In college, you may be bombarded with companies trying to persuade you to get a credit card. While having credit cards is a good way to build credit, you can quickly become overwhelmed with debt if you aren't careful. Keep these tips in mind to help you stay money-conscious and avoid credit card woes.
Shop around for a card. Before you sign up for a credit card, be sure to read the fine print. Find out what kind of fees come along with the card. Try to find a card that offers no annual fee and a low finance charge. Be aware that many cards also charge cash advance and late payment fees.
Don't fall for a free gift. Many credit card companies try to get college students to sign up for a card by offering them a free gift. If you signed up for a credit card every time a free gift was offered, then you would have way too many cards in your possession and would be tempted to use all of those cards. Don't sign up for more than one or two credit cards.
Open an account with a low credit limit. By getting a credit card with a low credit limit, you will be less likely to accrue a lot of debt. Try to get a card with a limit of around $1,000, but be sure not to charge to the limit.
Pay full amount each month. If you pay the total balance of your credit card each month, then you will build a good credit rating and prevent credit card trouble. Not paying off the entire amount in your account each month can lead to big finance charges. For example, if you have a credit card with a finance charge of 18% and a balance of $1,000, it could take you 12 years to pay it off if you only make the minimum required payments. The total interest cost over those 12 years would be $1,115. If you cannot pay your balance off in full each month, try to pay at least $25-$50 over the minimum payment.
Pay bill on time every month. If you send in late payments, not only will it hurt your credit score, but you will also be charged late fees. Make sure you know when your payment is due each month, so you can avoid those extra charges.
Avoid cash advances. For most cards, the fees for cash advances are steep, and interest rates are usually higher. If you need cash, use your ATM debit card.
Avoid impulse shopping. Use your credit card wisely. Avoid overspending. Don't put those shoes on your card if you know that you will not have enough money to pay them off when your bill arrives. Don't go out for lunch and charge a slice of pizza and a soda; purchases like that add up quickly. Try to only use your credit card in case of emergencies or when you know you will have enough to pay off the balance in full when your bill arrives.
Monitor your credit report. It's a good idea to know what is on your credit report. Review your report and look into any discrepancies. Credit report agencies can make mistakes.
Having a credit card can be beneficial if you use it in a responsible manner. If you get the best deal when you sign up for a card and pay off your balance each month by the due date, then you should have no problems avoiding credit card woes.