Best practices to avoid credit card pitfalls

Credit cards can be a powerful lifeline for students, offering a convenient method of payment and an opportunity to build a credit history. However, they should be used responsibly to avoid pitfalls and mistakes. Here are five tips for students using credit cards:

1. Learn About Credit Early

Three major credit bureaus track and score your credit: Experian, Equifax and TransUnion. Making or missing payments, what percentage of your available credit is being used, how old your lines of credit are and how many you have can all affect the score. Gaining an understanding of these credit factors can help you build your credit history in a positive way.

2. Use Credit Cards Wisely

If you have a credit limit of $2,000 on a credit card - that does not mean you have $2,000 to spend. A credit card balance is debt. The interest on that debt will compound, increasing the amount you owe the longer you carry the balance. A best practice is to pay off your balance by the end of your statement period to avoid paying unnecessary interest. Or, if you must use a credit card for an emergency expense, try to get the balance paid off as quickly as possible. Don’t treat credit cards like cash.

3. Track Your Spending

When convenient, put your credit card provider’s mobile app on your device and get in the habit of checking your activity and balance every day. It’s much easier to overspend or lose track of purchases or payments when you don’t pay attention. The ability to track your spending is a powerful tool, especially if you’re also trying to balance the pressures and deadlines of being a student.

4. Know Which Cards to Avoid

Some cards carry annual fees. Others don’t. Depending on the card, those fees could be steep. Beware of short-term interest rate offers. Some cards may offer a low introductory interest rate for a limited period of time that jumps significantly after the introductory period ends. It is especially important for those starting out, such as students, to avoid credit cards with high interest rates and high annual fees.

5. Be Aware of Suspicious Activity

One benefit of credit cards is the ability to provide a buffer against fraud and scams. If your card number has been skimmed or stolen and you identify purchases you’re sure you did not make, you can report the activity to your credit card and potentially have unauthorized charges waived or canceled. This is another reason why tracking your spending is important. Many credit card companies also actively track your credit score and can alert you to changes. If your score changes due to fraudulent activity, you have the right to dispute anything on your credit report with the reporting agency.

Remember, as a student, your classes aren’t the only curriculum. Learning life skills such as how to responsibly manage your spending and credit card usage is just as important as anything in the classroom. If you or someone you love is heading off to school and needs a credit card for emergency expenses, we can help! Our Mastercard^® Student Credit Card helps you manage your account while giving you the spending power you need. Click to learn more or apply online!

Sources:
https://www.forbes.com/advisor/credit-cards/how-to-use-a-credit-card/
https://www.cnbc.com/select/credit-tips-for-college-kids/
https://www.cnbc.com/select/credit-card-tips-for-new-users/
https://www.cnbc.com/2022/09/15/what-college-students-need-to-know-about-credit-cards.html

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