The do’s and don’ts of your first credit card

A good credit score has a big impact on the rest of your life — from buying a house to even your insurance rate. That’s why college students need to be thinking about how to get your first credit card and start establishing good credit now.

Be sure to use your first credit card wisely. (Credit: Pexels)

Be sure to use your first credit card wisely. (Credit: Pexels)

Read on for the things you need to know to make this happen for you.

Kinds of credit cards

Think that a credit card is just a credit card? Actually there are three kinds of credit cards that college students need to be aware of — a prepaid card, a secured card and an unsecured card. A secured card may be what you want to begin with to establish your credit, although an unsecured card is your goal. What’s the difference between the three? Here are the things you need to know: a prepaid card is one that you put cash on, kind of like a gift card, and then the money is removed as you make purchases. A secured card requires you to make a deposit. After that obligation is met, it works like a non-secured or unsecured credit card and you incur interest on any purchase that are not paid off in full at the end of each payment cycle.

Sometimes credit card companies or banks will allow you to transfer your secured account to an unsecured one after you have demonstrated that you qualify. While an unsecured credit card is best when you are focused on how to establish good credit, a secured card is a step in the right direction for your first credit card.

Using your first credit card

Once you have your first credit card, you need to know how to not abuse the privilege. After all, the whole purpose of your first credit card is to establish good credit. Want to learn more about your credit score? Check out this explanation. Here are the things you need to know as college students when it comes to proper use of your new credit card.

  • Use your card. Unfortunately you can’t prove you have good credit without actually using the card. The key to establishing good credit is to use the card, pay your bill on time and pay more than the minimum payment.
  • Budget your usage. Just because you have been giving a certain amount of credit, doesn’t mean you need to use it all. College students or anyone should aim to have a balance of less than half their total credit limit.
  • Don’t get too many cards. It’s exciting to have your first credit card. I get it. And once you start to establish credit, more lenders will come out of the woodwork. Be careful not to go overboard. Having too many cards is also bad for your credit.

Credit card mistakes

What are some other mistakes that college students need to try and avoid when it comes to your first credit card? The top three things you need to know so you can avoid damaging your credit before it is established include:

  • Using a credit card for everyday purchases like food and gas. You will end up paying for something that is long gone.
  • Constantly using a credit card because you are short on cash. If this happens you need to re-evaluate your spending.
  • Closing an account. This may feel good and be tempting, especially if the account has a higher interest rate, but this can have negative effects on your credit. It’s better to pay the account off and then put the card aside for emergencies only.

Have you already gotten your first credit card? Are you concerned about how to establish good credit? Let us know in the comments.

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