Your First Student Credit Card

Now that Congress has spoken and credit card companies have been reeled in a little bit, it’s not as easy for a student to get a credit card. That’s a good thing because credit cards are tricky animals to handle and even adults have a hard time using them correctly. So the fact that younger folks with even less financial experience are protected, even a little, is a victory.

But while it’s more difficult to get your first credit card if you’re still a student, it isn’t impossible. The credit card companies want you as a client and they're going to aggressively go after you. So you need to understand what you’re getting yourself into and what issues you may face. Here’s a short list.

Carrying a Balance Costs You Long-Term

It may seem tempting for you to charge something today and pay for it over the next few months. That’s one of the selling points of credit cards. But when you do carry a balance from month to month you need to realize that you’re increasing the cost of whatever you bought. That’s because you’re being charged interest on your balance and that interest is like a surcharge on every item you purchased. The longer you carry that balance, the more expensive every item on your statement gets.

So it’s in your best interest to pay off your balance completely every month by your due date. Otherwise you’ll be paying for that interest with your future earnings and you actually have less money to spend down the road. When you have less money tomorrow, it gets easier to charge again. Ultimately, if that cycle continues, you wind up in a deep hole that’s extremely difficult to dig out of. Which brings me to my next issue.

It Takes Discipline to Use Credit Cards Correctly

The only way a credit card is a benefit to you is if you control it instead of allowing it to control you. That means using it in a very simple manner and not straying from that path. And that means you can’t use it for impulse buys. When you do that you’re buying something you haven’t really considered thoroughly enough – and that spells trouble.

Use restraint with your card. Figure out ahead of time what you will use the card for. For instance, maybe you’ll use it to set up regular payments of certain monthly bills you have, like utility bills. Then, because you’ve saved the money you need to actually pay those bills ahead of time, you’ll pay off your balance when your statement arrives.

This will accomplish two things. First, your utilities will get paid in a timely fashion. Second, you’ll be building a positive credit history each time you pay that credit card bill. Just remember that however you use your credit card, you must think ahead and use restraint.

Ignore Your Monthly Statement at Your Own Peril

Credit card companies are notorious for charging all manner of fees. There are overdraft fees, late fees, and all sorts of others that can sneak up on you. By law, they’re required to disclose these fees within their statements and the other paperwork they send you. And they’ll do that too but it will be hidden in small print imbedded in different sections on the back pages of your statement. You have to find all of these notifications and figure out how to work with them.

For instance, you may have a special introductory interest rate but it may disappear in the blink of an eye if you’re late on even one payment. Or you may have multiple interest rates that apply to your charges and cash advances and one may be changing which would mean more interest to you. Or there may be a switch coming in your billing cycle which will upset your own payment calendar and result in late fees. The list really can go on from there.

The point here is that your credit card agreement constantly changes. What you signed up for six months ago may no longer be in effect. And it’s your credit card company that has all the power to make these changes – not you. So you’ll need to keep on your toes each and every month to protect yourself.

Final Thoughts

Your first Student credit card is a big deal. You’ll probably feel a lot of gratitude and loyalty to the bank that issued it to you. But you have to remember that to the bank it’s a business and they’ll treat your relationship with them in just that way. You have to do the same. So use that credit card wisely and protect yourself.