10 Smart Student Credit Rules

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I applied for my first credit card as a freshman in college, it was an AT&T branded Citi card that gave me free long distance phone minutes and a few rewards points. I was fortunate to have started building up my credit at the age of eighteen, which would prove to be crucial later on. I was even more fortunate never to have fallen down the credit card debt hole so many college students slip into, in part because I know my mom would’ve been furious. 🙂

To help all the rising freshmen, or perhaps the parents of rising freshmen, I offer up these ten rules for smart credit. Some of these are credit card rules and some are simply credit rules, hopefully all of them are helpful. Here are ten tips for students looking to build credit but not credit card debt:

10 Credit Rules for Students

  1. Check your credit reports: The Fair Credit Reporting Act gives you the right to review your credit reports and specialty reports once a year, take advantage and review it for errors. Your credit history is often used whenever you apply for jobs or try to find an apartment.
  2. Get a credit card early: I recommend applying for one of the best student credit cards and using it for small purchases each month. The sooner you can establish your credit, the better. When you graduate, a lot of things will depend on your credit so establishing it early is crucial.
  3. People will argue that you shouldn’t give a student a credit card ever. I think that’s a mistake, it’s like never letting a teenager drive. You want them to learn how to use something responsibly, not shield them from it until some magical clock says they’re suddenly responsible enough to drive or use credit.

  4. Don’t spend it unless you will pay it off: If you’re paying 18.90% APY interest on your credit card, it will take you over two years to pay off a $100 purchase if you pay the minimum of $5 a month. Over the two years, you’ll be paying $21 in interest for absolutely no reason whatsoever. Don’t spend the money unless you have it and can pay it off after the grace period.
  5. Set reminders for yourself EVERYWHERE: Always pay on time and set yourself up for success by putting reminders everywhere so you never pay late.
  6. Set up electronic bill pay: Set up an online account with the credit card company you have a card for and then link a bank account so you can pay with a click of a button. By lowering the barriers to payment, it’s easier for you to pay on time. You also save yourself a stamp and a rushed trip to the post office because you’re trying to get the check out on time.
  7. Keep a master card list: There will come a day when you will lose your wallet or purse, with every credit card along with it. Keep a master list of your credit cards and their customer service numbers so that you know who to call in case you ever lose your wallet.
  8. Never ever take a cash advance. Cash advances hit you with a fee when you make a withdrawal and then crush you with interest. There is always a better alternative to a cash advance, you just have to look around for options. You should never ever take a cash advance.
  9. Keep your identity safe. Don’t leave your cards lying around, don’t leave your statements lying around (in fact, go the paperless finances route), and treat the credit card as you would cash.
  10. Review your statements. When you get a statement, review ever charge on the list and make sure it’s legitimate. You won’t be liable for much if you catch the fraud early, so review everything.
  11. Don’t let anyone “borrow” your credit card. You should treat your credit card the same way you treat your driver’s license. It’s yours and only you should be using it. Never lend it out to anyone because if they do something wrong with it, you get to take responsibility of it.

I limited myself to listing ten tips but if you have one that’s not on the list, please let me know!

{ 12 comments, please add your thoughts now! }

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12 Responses to “10 Smart Student Credit Rules”

  1. Miranda says:

    This is a great list. I wish I had followed some of these rules when I was a student. Unfortunately, I learned most of the credit card rules the hard way — by not following them and the reaping the horrible, horrible consequences.

  2. Personally, I’m still anti-credit card. I built up my credit by purchasing a used car.

    I would put an addendum to #3. If you can’t pay the entire balance any month, cut up the credit card. You don’t have the discipline to keep your credit card under control and shouldn’t have one.

    I know that’s a little harsh but I think it’s important to not allow yourself to fall into allowing the credit card to have a balance and paying the minimum. It will kill you over time.

  3. My Journey says:

    Only one I can think about adding is:

    Do not use your card and then take cash from someone thinking you are going to use it pay off your card!

  4. Caitlin says:

    I’m pro-credit card, and even I agree with WMM’s comment. Paying off your credit card every month is one of the basic rules, just like how driving on the proper side of the road is one of the basic rules for driving a car. If you can’t follow the simple rules, take a step back and maybe try again later when you have a bit more self control. If you don’t learn to do it right, you put yourself at great risk in the future.

  5. #11. Put your credit card on autopilot. A student credit card is ONLY used to establish good credit. Ignore how your friends use their credit cards (“Dude! I rack up some many points and get all this free stuff!”). A credit card is ONLY used to establish good credit.

    It’s a steep learning curve (and you’ve got other stuff to study), don’t waste your time getting burned by it when you’ve gone all this time without a credit card. Cash is king.

    1. Take your time choosing a good credit card (no annual fees being the most important factor) from a good bank (not a retailer) as you will have to keep your first card for a long time to establish a good history (when you switch, you lose out).
    2. Set up auto-billing to your credit card with your fixed monthly utilities.
    3. Set up a separate chequing account for your fixed expenses like rent and utilities (hopefully you’ve already set up a 2-3 month buffer for your fixed expenses like rent and utilities)
    4. Send a debit preauthorization form from your chequing account bank to the payment processing center of your credit card. The full balance will automatically be paid off every month.
    5. Store your credit card in your filing cabinet and forget about it; it’s on autopilot.

    Other tips: Credit card scores grow the fastest when the credit use is a fraction of the total credit limit (10% is great). Call your credit card company every 6 months and ask for an interest rate reduction. You don’t use it or need it, which is why they’ll give it to you. By the time you graduate, you’ll have gone from their ridiculous interest rate down to something reasonable/comforting if you every run into a medical emergency in your family and need to carry a balance. Pick one. Be loyal. Reap the benefits of a long term relationship.

  6. This is really great advice. A credit card can be a wonderful tool – for establishing a credit history or for emergencies, but paying it off each month is crucial. With college seniors graduating with an average of more than $4,000 in credit card debt, it’s obvious that using credit cards wisely is important.

    It’s important for students to learn how to use credit responsibly, and they won’t learn that if they don’t have the opportunity to practice.

  7. eric says:

    Great, solid advice. I followed this exactly when I started with credit at 18 too and it’s served me well.

    I can’t emphasize enough the point you made about not giving students credit cards at all. That’s ludicrous to me and doesn’t solve any problems. Thanks for bringing it up!

  8. thomas says:

    Your first card wasn’t Discover? Man your freshman welcome pack must of sucked!

    These rules apply for everyone, not just students.

  9. Julio says:

    I use the statement date as my reminder. Whenever I get the email that my statement is ready, I usually log in and download it and immediately schedule the payment for the day it’s due. That way I’m sure to be on time, every time and not have to worry about my internet access being down on the day my payment was due. With most cards allowing you to schedule payments in advance, I don’t see how you could be late with payments.

  10. Alex says:

    Thanks for the tips! I’m a college student who’s been avoiding credit cards because I don’t want to develop any bad habits. With them. It’s about time I shrug off those fears.

  11. jillianlou says:

    Get A credit card early – emphasis on the A. Don’t sign up for more than one or two – you don’t need thousands of dollars of available credit!

    There are plenty of credit cards with NO annual fee – don’t sign up for one that has one! The rewards are never worth it.

  12. Katrina Shoemaker says:

    Awesome list! I can’t say that I disagree with most of what was said!

    I know that I have avoided getting a credit card because- It is extremely easy to just swipe a card and forget that you may not have that money to use. Over drawing on your account because of this can cause major issues!

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