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How To Use Student Credit Cards the Right Way

Many students study away from their home, either in their own country or abroad. They manage all their daily expenses, including hostel, study material, commute, and others. To make transactions convenient and easier for them, many banks offer a special credit cards for students. The best thing is that they are available to students with no credit history.

While a student gets admission into their dream college and receives their first credit card, it is common for them to get swayed and splurge on unnecessary expenses. They don’t realise the significance of using their credit card responsibly at a tender age. They also don’t know that they can use this credit card to build credit and improve their finances for the future. With the correct usage of their credit students’ credit cards, they can build a good credit score and learn the value of budgeting and deadlines. Here, we will explore a few ways to make the best use of a students’ credit card.

Spend Within Your Means

Remember, whatever you purchase with your credit card, you have to eventually repay its price to the credit card company. Overextending yourself can lead to accumulated interest costs and more challenging card bill payments. Since these cards are meant for people with no credit history, they usually come at a high interest rate that you would not be happy to pay. 

Ideally, you should pay off your credit card balance at the end of each billing cycle. Paying back only the minimum will only accrue the interest amount and lead to credit card debt. Even if your card issuer has given you an interest-free period, they will charge you the full interest around if you fail to repay the balance within that period.

Start Budgeting

Budgeting is a great technique to make your finances work for you. Monitor your expenses, prioritise them according to their necessity, and compare them with your income. Budgeting can help you get a hold of your money management and reduce unnecessary impulse purchases.

Maintain a Low Credit Utilization Ratio

The credit utilisation ratio is the ratio between your available credit limit and the percentage of it you use. When you get credit card for students, you get a credit limit up to which you can make your expenses. However, you should not use all the credit limit available to you. Ideally, you should keep your credit utilisation ratio below 30%. This means there should be a gap of at least 70% between your credit card bill amount and your available credit limit. A high credit utilisation ratio shows that you largely depend on credit to carry out your day-to-day expenses. Consequently, it reduces your credit score and harms your creditworthiness.

Pay Off Your Credit Card Balance in Full Each Month

Each month, paying off your full balance can save you from compounding interest and accumulating credit card debt. It also helps you build a strong credit history without accruing debt on your credit card for students. Keep checking your account to avoid overspending and clear your monthly balance to save on the interest outgo.

Avoid Cash Advances

You may get cash advances on your credit card. However, as soon as you take it, you are charged a fee that you have to pay with your credit card bill. Plus, these fees tend to be much higher than what you have to pay for regular purchases. Therefore, avoid taking cash advances as far as possible.

Don’t Take Too Many Cards

While you may be eligible for credit cards from several companies, you should resist the temptation to apply for all. Applying for multiple credit cards simultaneously can reduce your credit score. Keeping track of all their expenses and payments can also become a challenging task for novices. Therefore, get credit card from one provider and maintain it well to meet your finances and build your credit history.

Maintain Your Students’ Credit Card 

When you apply for a loan later in life, the lenders would want to see the length of your credit history. So, even if you stop using this card in a few years, don’t surrender it. Keep it with you to maintain your credit length, as it will positively affect your credit.

Take these points as a manual to use your credit card for students the right way. Once you understand them, apply for a student’s credit card now but don’t forget to keep track and control your spending habits. Responsible use of your credit card can help you build credit and manage your finances.

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