College and University Blog
Staying Out of the Credit Card Trap
The college years are when many people get their first credit card鈥� it鈥檚 also when an unfortunate number of them start racking up credit card debt! As tempting as it can be to spend now and pay later, it鈥檚 one of the worst mistakes you can make—worse than flunking an exam, streaking naked with the debate team, or dumping a pitcher of beer on your roommate鈥檚 head.
Why? Because unlike those mistakes, there is no such thing as a do-over or foolishness fading from memory over time. Credit card problems can follow you forever.
You Want a Good Credit Score
One of the reasons good credit card management is so important is because of your credit rating. Every time you miss a payment, your credit rating goes down. Having a good credit rating is important for renting apartments without a co-signer and, later in life, purchasing cars and houses.
While you might not feel that buying a house is very important to you right now, trust me鈥攕omeday when you have an active toddler jumping around an apartment and no backyard, you鈥檒l feel very differently! If your credit rating isn鈥檛 good enough to qualify for a mortgage, you鈥檒l be wishing for a time machine to go back and give your college self a piece of your mind. That鈥檚 not all a strong credit rating is good for, though鈥攕ome employers look at them, too.
Manage Credit Cards Wisely
So how can you get a credit card, start building your rating, and also stay out of trouble? Follow these simple guidelines:
鈥� Use a credit card to build a credit rating and make your finances convenient to track, not to purchase things you cannot truly afford. Pay your balance in full every single month. Otherwise, you鈥檙e throwing money away because those interest fees add up like a Jenga tower in the blink of an eye.
鈥� Pick a credit card based on interest rates and other financial interests, not pretty display, sign-up freebie, or cute credit card company employee. Any information you could want about potential cards is available on the websites of the companies offering them. Look for a card without an annual fee, the lowest interest rate you can find, and a modest limit鈥攖hat way, even if you go on a drunken eBay spree, you won鈥檛 ruin your finances forever. On the same page, limit yourself to a single card. Until you鈥檙e making money at a full-time career, there鈥檚 just no reason for multiple cards.
鈥� Do not, for the love of education, take out cash advances on your credit card. The fees for doing so are high and the overall benefit is low. If you don鈥檛 have the money, you don鈥檛 have the money.
鈥� Read every single, boring word the credit card company sends you. Assume that the higher the rate hike or transaction fee, the tinier the print! Credit card companies change terms all the time, and they don鈥檛 need your permission. Don鈥檛 let them slip anything past you.
鈥� Keep an emergency fund. If you can keep $1000 or at least several hundred aside for any kind of true emergency, you won鈥檛 risk going into debt when one comes along.
鈥� Don鈥檛 ever鈥攁nd I meant EVER鈥攍et a friend use your credit card. It doesn鈥檛 matter how good of a friend they are, how much your trust them, or how minor a purchase they want to make. Down that road lies ruin, and no credit card company will have sympathy for, 鈥渕y friend promised to pay me back!鈥� It鈥檚 100% on you. You can, however, share what you鈥檝e learned about credit cards from researching the best choice for you to help your friend apply for their own.
If you end up getting into trouble despite your best intentions, do yourself a favor and cancel your card. Cut it up and throw away each piece in a different garbage can. A bit of bad credit is better than a lot of bad credit. Admit you aren鈥檛 ready for the responsibility and try again after college. And just remember鈥here鈥檚 no such thing as free money!
Elisabeth Bailey is a freelance writer and editor with particular interests in academics, food,and sustainability . She is also the author of A Taste of the Maritimes: Local, Seasonal Recipes the Whole Year Round and writes regularly for Canadian Farmers鈥� Almanac and the National Wildlife Federation. Elisabeth and her family live and enjoy great local food in Lunenburg, Nova Scotia.