As a new college student, you’re probably aware of the plentiful student credit card offers available to you. Your dorm mailbox probably receives a few offers a week, and especially early in the semester, you’re likely to find kiosks set up around campus offering a variety of freebies when you sign up for their card. While it can certainly be beneficial to have a credit card, there are some things to consider first.
Do You Really Need a Credit Card?
Having a credit card while in college certainly has its place, but it may not be absolutely necessary. Before you sign up for a new student credit card, take a moment to assess whether or not you really need one.
Do you already have an existing card? Do you have a debit card linked to an account with a reasonable balance? If you already have a credit card, there is probably little reason to get another one. Also, if you have money in the bank and a debit card, that may be sufficient for your needs. If you don’t currently have a credit card, it can make sense to get one, but you have to be sure that you are getting one for the right reasons.
Emergencies Only
At this stage in your life, a credit card should serve as an emergency source of funds. If you are like most students, money is tight and the ability to save up for an emergency fund, so a credit card can be a viable option.
Since this card should be used for emergencies only, the benefits of the card are not that important. You will obviously want to find a card with a low interest rate, but don’t be swayed by bonus points or rewards programs. Since the card won’t be used for daily purchases, you’ll likely never see the benefits of the rewards.
A Student Credit Card Builds Your Credit Foundation
For many students, a credit card in college is the first step in establishing a credit history. Your credit history will be with you for the rest of your life, so taking extra care of it during your college years can help you years in the future.
If you do carry a balance or make a purchase on your credit card, the most important thing to do is to make your payments on time. Your payment history is one of the largest factors in determining your credit score, and late payments can stay on your credit report for seven years. A few late payments or maxed out cards could significantly damage your credit well after graduation while you’re trying to buy a car or a home.
Beware of the Freebies
Don’t be fooled into the credit card company’s attempt to win your business. They will lure you in with free t-shirts, gift cards, or even tickets to a sporting event. Everyone loves something that’s free, but these items are hardly free.
Interest and fees on even a low balance can total hundreds of dollars a year. That free t-shirt or $20 gift card you received for signing up may end up costing you far more in the long run that you aren’t even aware of.