Whether you’re arriving on a college campus for the first time or returning for your final semester, you have access to something most people do not: a student credit card.
This article isn’t trying to sell you a credit card. This post will show you how you can set up your financial future right now and save yourself a lot of money and time in the long run.
1. Treat your credit card like a debit card
When used responsibly and correctly, student credit cards can help improve your credit score. A better credit score gives you better interest rates on future mortgages or loans, so it saves you money in the long run.
And guess what? You already have the mentality to be responsible with one. It’s safe to assume you already have a checking account and a debit card you use to make some, if not all, of your purchases. You frequently monitor your checking account online or on your phone to make sure you don’t spend more than you have.
If you can follow these same practices with a credit card, then you’re ready to use one responsibly. Don’t spend money you don’t have, and always pay your balance in full.
Your credit card and your debit card look the same, so treat them the same. (Click here to Tweet this thought.) Just because you have a credit card with a $2,000 limit does not mean you should spend $2,000 in a week.
2. Think about your long-term goals
Now let’s look at what your debit card has done to reward you for spending your (or your parents’) hard-earned money.
For the rest of your life, you’ll have a credit score attached to your name. This credit score is a grade on how well you pay off your debts and how trustworthy you are with money — mainly other people’s money.
Sometime in the future, you’ll likely want to buy a car, go back to school or put money down for a mortgage. Whether you like it or not, you most likely will have to borrow money from a financial institution to do any of those things. And along with that loan will come an interest rate.
The better your credit score, the lower your interest rate will be, and the faster you can pay off that loan.
3. Establish good credit scores now to help you out later
The only way to improve your credit score is to essentially borrow money and pay it back. That’s what a credit card does.
With a credit card, you get to spend money you don’t have and prove you possess the ability to pay it back. This is key — credit cards are also the easiest way to destroy your credit history.
So by paying off your student credit card each month, you get a head start on your credit score. Start developing an excellent rating now so you’ll be prepared for the financial decisions you need to make in the future.
4. Take advantage of student perks while you got ’em
So, why not wait until after college when you have a job to get a credit card?
Unfortunately, it’s much harder to get approved for a credit card when you have little to no credit history. Students credit cards are not available to anyone else, and banks make the approval process easy. They know from experience that many students will spend money they don’t have and make the banks tons of money.
But you won’t. You’re smart. You can apply for a student credit card, easily get approved and start using it responsibly.
Remember, you’re using your credit card as you would your debit card.
5. Get big benefits even if you’re a small spender
With a student credit card, you might think the more money you spend, the better your credit score will be. That’s not true.
Even if you put just $50 a month on your student credit card — say, for groceries or gas — your credit score will still improve as long as you pay your balance in full each month.
Additionally, most student credit card companies walk you through the whole process with tips and alerts to make sure you stay on top of your payments. After all, the last thing a credit card company wants is for you to spend a bunch of money you can’t pay back.
A student credit card can be a tool to help you start your credit history on the right foot. So look at all your options and find one that’s right for you. You might even find one that comes with some extra rewards, like cash back, airline miles or points you can put towards merchandise.
And, just maybe, once you’re done with school, your credit score will be high enough that you can get a better rewards credit card and a lower interest rate on a loan than even your parents have.