First Credit Card for College Students : Financial Stress

Building credit probably isn’t something you want to think about going into your freshman year of college. Heck, it’s not even something people in the “real world” want to think about!

But your credit score and credit worthiness play a big role in how you’ll navigate the world. From buying a car to renting a better apartment, your credit history matters.

If you’re just out of high school or about to graduate, your credit score is probably farthest from your mind. But before you pack up the U-Haul and move to school this year, try to give it some thought!

Unfortunately, colleges and universities rarely offer personal finance courses. It’s up to you to figure it out as you go!

So let’s take a look at some of the basics of building credit before you pursue your higher education.

5 Concepts to Understand Before You Take Out Your First Credit Card

Your credit score reflects how well you manage debt. One of the easiest ways to build credit is with an introductory credit card.

Every student’s credit needs are different. There’s no one size fits all credit card when you’re in college. But the following are some things to consider before making a decision on what’s right for your first time credit card.

Consider Using a Secured Credit Card

One of the easiest credit cards to get is a secured credit card. They’re often where young students start with building credit.

Secured credit cards work by putting a deposit in a hidden savings account. This money protects the card issuer if you fail to make a payment. They can use this deposit to foot the bill if you stop paying! You wouldn’t do that though, right?

Don’t worry. You can get this money back though if you cancel the card or move on to a different line of credit

Authorized Users

An alternative to secured credit is becoming an authorized user of your parents’ credit card. Your parents can add you to their account. Then you can use their line of credit for your own purchases.

This gives banks peace of mind knowing your parent is still the one paying the bill every month. The financial burden falls between you and your parents, not you and the provider.

The only downfall with authorized user cards is that not all of them build credit. Check with each provider to see if they report to credit bureaus about authorized users’ credit history.

This is important because you actually want your credit purchases to help you later on. You don’t just want to use your parents credit card because it feels cool!

Student Credit Cards

Some credit card companies are now offering student credit cards. They offer small credit lines which means you can’t go on a spending spree! But getting groceries or paying your rent with your card are definitely possible.

These also don’t have stringent credit checks. As you build up a credit history, your credit line may get extended.

Student credit cards are designed for first time borrowers. If you’ve never had credit before, they’re a great opportunity to start.

Joint Credit Cards

Let’s take one last look at getting help from your parents. Joint credit cards are similar to authorized user cards except they give you your own line of credit.

Your parent or guardian can act as a co-sign on your card. If you’re not paying your bills on time, your co-signer’s credit is also affected. So make sure you pay your credit card bill!

But if you have a good relationship with your parents, a joint card gives issuers some peace of mind. They know they’ll have recourse if you can’t pay your bills.

Check out Experian Boost

Finally, check out a tool called Experian Boost. This may not be a good tool to use if you’re still in your freshman year. But if you’ve been living alone for some time and still haven’t built credit, check it out.

Experian is a credit bureau. They track credit history of millions of Americans and deliver what we typically know as a credit report or score.

But not everyone uses traditional lines of credit.

Experian Boost hopes to bridge that gap by using your other monthly bills to give your credit score a boost. Pay your Netflix bill on time every month? What about your electric bill? All of those can go toward helping to boost your credit score.

Experian Boost won’t blow your old score out of the water. But getting an extra 15-20 points on your credit score before applying for an apartment can be a big deal!

Pay Your Balance in Full

You’re a freshman in college. You’re trying to navigate classes, living alone, and paying your bills. It’s a lot to handle! But the biggest lesson behind having a credit card is to pay your balance in full every month!

Credit card companies make money if you don’t pay your full balance each month. Your balance rolls over to the following month with interest added. And the interest on credit cards is usually high! For introductory credit cards it’s not uncommon to have rates between 25 and 30% APR. If you only make interest payments or minimum monthly payments, it could take years to pay it off!

Keeping up with your monthly balance results in a net positive for your credit score. Making payments on time shows lenders you’re trustworthy. In fact, 35% of your FICO score is your payment history. So keeping up with your payments can affect your credit score in a major way. Poor credit scores are hard to rebuild, so stay on top of it!

Staying on Top of Your Credit

Modern apps and tools make it a breeze to keep track of your credit building. For starters, your credit card provider likely has text alerts. Get reminders about upcoming bills, unusual spending, and more. Apps like Turbo do a deep dive into your credit and keep track of your credit score in near real time.

Finally, in conjunction with a working budget, your first ventures into credit can be tracked. See where you’re spending your money and lay off those late night bites if your credit card is getting out of hand. Building credit is a part of growing up. It can take years to get a good handle on what it all means. But when you’re going into college, it’s a great time to start building up your credit history. It will make it easier to make money moves after you finally get your degree.

Finally, there’s no rush to get a credit card if you’re worried about the responsibility! You can still use a debit card for the first few years of college to get used to paying bills on your own. Debit cards are tied to your bank account, so you can never overspend. It’s also worth mentioning that your student loans affect your credit score as well. So if you borrowed money to go to trade school or even community college, those credit lines all give you a boost.

Taking on credit and debt comes with responsibility so make sure you’re ready for it!

Have you ever watched a commercial or heard someone talking about credit card rewards and wondered if you had a decent credit card or are missing out on something spectacular? Now is the time to learn about all kinds of credit cards and the interest rates available.