Being a college student comes with a ton of daily decisions you have to make. You want make the most of your time and your money, get good grades and keep up relationships with friends and family, all while trying to find time to get quality rest. So when it comes to getting a credit card, you want to make the process as simple as possible, but you also don’t want to take it lightly – we’re talking about maximizing the money you’re spending. There are some factors you need to consider before choosing which credit card is best for you:
Your Credit Score
Credit card companies don’t just hand out credit cards to anyone. When used responsibly, getting a credit card while in college can be a good thing, and can make your financial life after graduation much easier.
Your current credit score will come into play when applying for a credit card. Just like your GPA is a reflection on how well you’re doing in school, your credit score is a grade on how well you pay back money that you borrow – which is what you’re doing when you spend with a credit card. You do not have to prove that you have the money in your possession when you buy something with a credit card; you just have to be able to pay it back at the end of each month when your credit card payment is due. If you have some form of a credit history (which can include a car loan, rent, student loans) then you will have a credit score. If your credit score is good, you will have many options when it comes to choosing which credit card you want. If you have bad credit, or do not have any credit history, there are still options, such as student credit cards and secured credit cards.
Interest Rate and Fees
One of the most important things to learn about credit cards is how interest works. If you do not pay your bill on time or do not pay it in full each month, you will be charged interest on what is left. So basically, you are paying money for spending money. With a credit card, you need to be diligent in paying off what you spend on it. Just because you have a credit card does not mean that you need to use it to pay for everything. If you know that you have the money to pay it off, then use your credit card to spend, possible earn some rewards (see below), and use it to increase your credit score. Not paying your bill in full each month will end up costing you more money and making your financial life more difficult than it already is. But on the off chance that you do miss a payment, or cannot pay off your credit card balance in full, you need to know what interest rate you will be paying – an important factor when it comes to researching credit cards.
Fees are another variable that you need to do some research on. When you miss a payment, or are late, there will be a fee that you have to pay. Again, you will be paying money for spending money. If you go over your credit limit there could be a fee for that as well. Some cards even come with monthly fees. Read all of the fine print on the credit card you are researching to understand the fees that could be associated with it.
Yes, there are credit cards that offer rewards for spending money with them. What pays for these rewards? The people who do not pay their bill in full each month and end up paying interest. But, as we said above, if you pay your bill on time and in full each month, you won’t pay any interest and you can take full advantage of the rewards that credit card companies offer. These rewards come in the form of cash back, free to discounted travel, or points that can be used for just about anything. There are even student credit cards that offer rewards for having good grades. So when looking at which credit card is right for you in college, take a look at the rewards that each card offers and see which card can maximize the money that you are spending.
Now that you know the factors you need to consider when choosing a credit card, you need to do some research. Knowing your credit score will make this process a lot easier. You don’t want to apply for credit cards that require an excellent credit score when you don’t have one. Companies like Equifax and TransUnion are dependable and will mail you your credit score. You may even find a rewards credit card that comes with a great sign up bonus, as they sometimes have offers that cannot be found anywhere else. And of course, when in doubt, head to your bank and talk to a financial services representative about what your options are. After you obtain the credit card that you want, and use it responsibly, you will be on your way to getting the most out the money that you spend by increasing your credit score and earning some nice rewards in the process.
This article was contributed by guest author Matthew Coan.