Smart Credit Card Usage for College Students

Before any student is offered a credit card; it should come with valuable lessons to preserve their credit rating and financial stability. Unfortunately, students are one of the target demographics of credit card companies, as they are inexperienced and many students will max out their card before they receive their first bill!

How can you ensure that your son or daughter uses their card responsibly before jetting off to university or college? First, ensure they realize the true cost of owning and using a credit card. From annual fees to interest rates, numbers mean everything.

Students are often subject to higher interest rates as many have not established a credit history thus have lower credit scores. For this reason, maintaining a balance should be avoided, especially while using a new card. If a balance has been created, it is essential to stop using the card and take measures such as picking up a part time job or a obtaining a personal loan from family members to pay off the balance. The less debt that the student is carrying, the higher their credit score will be - this is the formula for creating a high credit score from the very beginning.

How do you ensure that your credit score is increased? Many students are unaware that something as simple as maintaining minimum monthly payments or holding a cell phone with a monthly bill can be essential in increasing your credit score. Parents can co-sign for loans and other credit advances and ensure that payments are made to create an adequate credit history.

After the account has been open for an extended period of time, it is time to contact the credit card company and ask for a lower interest rate. In as little as a year, if good credit history has been maintained - many companies will offer to lower the interest rate for the card holder.

It is crucial that students realize this is not free money; this money will have to be repaid with interest. Credit cards are helpful for dealing with short term financial shortfalls, but should be paid within the grace period to avoid additional interest charges. With most credit card companies, the grace period extends from twenty to twenty five days after the purchase has been charged to the card, therefore, paying for the item within this period can save money on interest charges that would accumulate to the card.