By Becky Burgess
Credit cards can be intimidating for students, especially since many of us don’t know how to manage and maintain them.
For senior Sociology major Noga Baruch at the University of Georgia, a credit card was the first step for establishing credit before graduating college. But she said spending and paying back the money can prove difficult.
“Whenever I have really large amounts of things, that’s when I use the credit card,” said Baruch, “I had to pay for LSAC (Law School Admissions Council) recently and that was $185, and then I was like, ‘I don’t have that money so I’m going to put it on my credit card and then slowly drop things into it’… It’s just a process of trying to pay back for those things.”
According to Brenda Cude, a professor in the University of Georgia’s department of financial planning, housing and consumer economics, credit cards are “the most available message for most students to begin to build a credit history.” However, before signing up for one, here are some things to know about credit cards:
Figure out if you’re eligible for a credit card
There are some criteria to meet in order to obtain a credit card. “If you’re not 21, there’s a law that says that you have to have either a parent cosigner or be what’s called an authorized user of a parent’s credit card, meaning it’s the parents card and they add you to the card, or proof that you have income to be able to meet the financial obligations of having a credit card,” Cude explained.
Do your research to find the right fit
There’s more than one type of credit card. Shop around to find the best one for you. “Go to any of the many websites that identify credit cards in different categories, like credit cards for students, credit cards for people who have no credit history, and shop among those credit cards looking for one that matches what you’re interested in,” Cude said. Decide what features are most important to you, whether it’s a low annual percentage rate (APR), good online features or rewards for spending or paying on time.
You’re spending your own money
Many college students start out with a debit card, and making the transition from debit to credit can be challenging. “Change your psychological mindset about whose money this is by immediately making it your money when you use the credit card,” Cude said. “I think somebody who is just generally not very good at management… If they don’t have their life pretty organized, then a credit card won’t make it any easier, it may make it harder.” Though credit cards are payed off later, the money you spend is still your own. Therefore, understanding how to plan and budget based on what money you have and what money you will have in the future is critical in order to stay ahead of your credit card payments.
Less isn’t always more
A common misconception is that fewer credit cards mean better credit. That’s not entirely true. According to Cude, “There’s a number of reasons why having more credit cards, managed well, is associated with a higher credit score, so when somebody’s ready for a credit card I think starting with one is fine, but then I think ultimately two is better. It helps your credit score.” Cude said some people can even use 12; it just depends on how well they manage them. If you are financially stable and well organized, then having multiple credit cards shouldn’t be too difficult.
Pay more now, spend less later
Paying the credit card balance in full every month eliminates the need to worry about the APR because paying in full eliminates any interest. However, if you only pay the minimum required payments, you’ll end up spending more in the long run. Cude said people don’t realize that if they only make the minimum payment, they could end up paying two or three times or even more of the original purchase price of an item as interest on the unpaid balance accrues. Cude challenge students to ask themselves if a night downtown that cost $50, was really worth $100 or $150? Because that’s what it could end up costing them if they only make the minimum payment.