By Jessica Green

Lucy Howard built her credit history for over a year without a single error. In the summer of 2019, Howard got her first credit card after realizing the importance of establishing good money-managing habits.

The sophomore English major at the University of Georgia now has two credit cards, a Visa that is linked to her parents account and an American Express that she handles herself.

“I had to create a savings account for my American Express,” Howard said. “So, I had to go to the bank and put my money in and everything, and then link the credit card up with that account.”

Two things Howard researched before choosing a credit card were how widely accepted it was at various businesses and the spending limit. She also discovered tools for tracking and managing her usage.

“I’ve set up an auto-pay. So, the payment goes through automatically,” Howard said. “And for budgeting, I have a set amount that I spend each month. So, I just go into my account and look each week at how much I spent, so I can see if I’m on track.”

Before getting a credit card UGA financial planning professor Michael Thomas said students should ask themselves why they want it.

“If they got a credit card just being completely honest with themselves that they will spend way more than they ever should because of their current consumption patterns and behaviors, and its only limited because they’re actually using cash, then getting a credit card can be a slippery slope,” Thomas said.

Thomas recommended authorized user cards and secured cards. Authorized user cards link to a family member’s account and transfer their credit history to yours, sometimes offering a boost. Secured cards require you to have money in an account to serve as collateral in case of any missed payments.

“One of the best things that students can do honestly is to shop around for a credit card and not necessarily just go with credit card offers that they received maybe from their banking institution or something that’s been solicited to them,” Thomas said. “There are several types of platforms. There’s Magnify Money, there’s BankRate.com, there’s Credit Karma, where individuals can find a credit card that’s reasonably low interest rate and has no fees.”

According to Thomas, paying your credit card balance in full every month eliminates the stress of paying interest. He recommends users set a 30% threshold of their spending limit to ease debt management.

“So, the idea is to be self-aware to understand what your spending behaviors and patterns are so you can say, ‘Oh, I’m gonna pay for groceries and gas, up to $250 because that’s reasonably what I pay every month.’ You set that money aside at the beginning of the month,” he said.

Thomas warned against missing payments, as even one missed payment could result in a 70-point drop in your credit score.

“Once you have those negative marks, it can literally take you another year and a half or two to get your credit score where it needs to be,” Thomas said. “Now you have negative marks that are going to sit on your credit report for seven years.”

According to Thomas, students should create an accountability system with spending alerts and an established budget.

“You could actually create a system of using a credit card that is mindful and not mindless, and unfortunately for college students, it’s very easy to be mindless with a credit card,” Thomas said. “Not because you don’t care but because you as a college student are inundated with so much stuff.”

Jessica Green is studying journalism at the University of Georgia. She is a 2020 Cox-SABEW Fellow, a training program in partnership with UGA’s Cox Institute for Journalism Innovation, Management & Leadership.