Do You Know How to Maintain Your Good Credit Rating with Your Student Credit Cards?
Student credit cards are probably your first chance to establish your credit rating. However, it can be difficult to use them wisely, since they have higher interest rates that accrue higher levels of debt faster than regular credit cards, and their issuers tempt you to use them to splurge on yourself. Here are a few ways you can resist the pressure and use your student credit cards to build up your credit rating.
* Be choosy about how you use your student credit cards. Don’t charge more than you will be able to pay at the end of the month unless you are in an emergency. While you do need to use your credit cards to establish a credit rating, using them too much will load you with debt that can cause a cascade effect and lead to trouble with your credit rating.
* Don’t let charges accumulate. You may see a 12% interest rate and think you’ll pay an extra 12% on an item. That’s nothing. But each month, your interest compounds.Each month, your account accrues one twelfth of the total interest, or 1% of that 12% annual rate. That 1% is dropped on top of the rest of the money you owe the credit card company. Instead of paying off your original debt, you pay interest on your interest. If you cannot pay off your credit card for several years, as is likely when people run up bills in the thousands of dollars, you will end up paying more in interest than the original item cost. Skip that; you need the money more than the credit card company does. Keep your balance low, and zero it out as often as you can afford to.
* Pay your bill on time, every time. Being even a day late (or, for some student credit cards, an hour late) will saddle you with late fee of $35 or more, and the credit card company could raise your interest rate. Setting up automatic payments through an electronic checking account can prevent late payments. And if you make a mistake and send a payment in late, call the credit company right away and ask whether they will waive the late fee and the interest rate hike. Issuers frequently forgive an occasional slip up on the part of an otherwise good customer.
* Examine your credit report several times a year for incorrect information. If there is a problem with your report, like an account reported as being in default or listings for student credit cards you didn’t sign up for, take care of the problem immediately. It’s your best protection against credit problems and identity theft. You are entitled to one free credit report a year from each of the three credit firms, Experian, Equifax, and TransUnion, so you can check your report every four months for free. The only official and truly free site is annualcreditreport.com, which is approved by the FTC.