How to Get and Manage Your First Credit Card as a College Student
When I turned 18 and entered college, one of the first things I did was get a credit card. My parents had long instilled in me the importance of getting a credit card early and building up my credit.
While I might not need a good credit score now, I will need it in the future when I apply for apartment leases and car loans, to name a few. Having a few extra years where I can build up credit is useful.
Upon talking to my peers, I found that many of them did not have credit cards. When I asked why, their reasons varied from their parents did not think they were responsible enough to they had no need for it.
The most common response was that they thought credit cards were too complicated and they struggled to get approved for them.
Credit cards are an important part of your financial journey and you should try to start building your credit history as early as possible. While it may seem scary or difficult, getting a credit card actually is not hard!
In fact, if you use them correctly, credit cards will give you all the benefits of using a debit card plus way more. In the following, I will show you how to get and manage your first credit card so you are a pro in freshman year.
Do your research
This is probably one of the most exciting parts of the process when starting out. While doing extensive research may seem tedious, it can also be fun to look at all the benefits you could be getting. Also, let’s be real, it’s fun to look at the card designs you could have.
When you are starting your research, make sure you always narrow your search by specifically looking for starter or student cards. These are credit cards that are designed for people like you, students or other individuals who otherwise have no credit history and are looking to start building it.
Keep in mind that these credit cards will likely have low credit limits and high interest rates, but if you manage your card with the tips that follow, neither of these should be much of an issue.
If the low credit limit, which is typically around $500, is a problem for you, you may want to consider some other alternatives that I will list later in this article.
As you continue to hone in on the cards you want, there are some helpful websites you may want to look at to give you an easy and holistic review of the cards. While it is of course important to look at the card details on the official website, sometimes, the corporate lingo may be a bit difficult to understand.
Blogs and YouTubers specifically review credit cards and provide financial advice. One great site for this is NerdWallet. They review thousands of credit cards and quickly break down the pros and cons for each credit card you are looking at.
Another great website is Credit Karma. Similar to NerdWallet, this website also analyzes many credit cards and breaks down the benefits to the readers in an easy, digestible manner.
Beyond using these websites to find the kind of card you want to apply for, it is also important to learn about how credit scores are calculated if you do not know yet. Investopedia has a great explanation you can take a look at for something more in depth.
However, in short, a credit history is calculated by taking a number of things into account including any loans you have, how you are making your payments (do you default on loans or pay the month in full?), and how long you have established a line of credit.
Credit scores are on a scale of 300 to 800 and anywhere from 690 to 800 is typically considered the good to excellent range. It is important to keep in mind how a credit score works to ensure you are taking steps to earn and maintain a great credit score.
Choosing the right card for you
Once you’ve got your list narrowed down to your top few cards you are considering, here are some things you may want to consider to help you make that final decision.
If you think you may be traveling abroad at all, then take a look at the cards and see if they charge a foreign transaction fee. Another thing to think about is the card issuer. This means if the card is VISA, MasterCard, American Express, Discover, or something else.
Generally speaking, VISA is the most universally accepted although MasterCard is a close competitor and American Express is increasing their vendors.
One important thing to consider is the interest rates. While you should not be revolving your card at all if you follow the tips below, you still may want to consider choosing a card with a lower interest rate just in case you do carry a balance from one month to the next.
Going along with this, some cards may offer an intro interest rate at 0% APR (annual percentage rate) which may be a great deal to take some of the stress off getting a first credit card.
Similarly, some cards may offer bonus introductory rewards and varying levels of cash back. It is important that you look at your lifestyle, income, and how much you think you will be spending on the card to make the right card choice for you.
Talk to your parents, guardians, or someone you trust
If you are ever in doubt while choosing a credit card, turning to someone you trust to ask questions can be a great way to help you make decisions. Many adults likely have credit cards and can offer you their advice and opinions on the kind of credit card you should choose.
To top it off, they likely have much more experience to draw on when making their recommendations.
Additionally, if you think you will need a higher credit limit than what is likely offered on most introductory cards ($500), you do have other alternatives. Some individuals may find themselves with large monthly bills that go over the credit limit and are seeking alternatives.
Not to fear, you can still have a credit card! If you can find someone that trusts you, ask them to see if they would be willing to add you as an authorized user to their card.
An authorized user is someone that is added onto the main individual’s card. You would get your own physical credit card with your own unique number. However, you would be under their account.
While you still have to pay your own bills, you would likely be able to receive their credit limit and build your credit score. As an authorized user it is important to keep in mind that if you miss a bill, you will affect both your and the owner’s credit score.
This is why it is important to find someone that trusts you to be their authorized user. The benefits for you and them can be great, but if you make a mistake, it will impact both individuals. This is a great workaround for some individuals so make sure to keep it in mind.
While you are researching the kind of card you want to apply for, you must also keep in mind that you need to start saving up money if you have not already. Some credit cards may require some sort of balance to be stored in the account at all times – a deposit.
However, you may also need to save money if you do not already have a checking or savings account. Having one of these accounts is crucial to getting a credit card because it is the way that you will be making your monthly payments.
At the same time, just because the credit card is borrowing money, you still have to pay it off. There is no sense in getting a credit card without having any savings because you will simply find yourself immediately in debt with no way to pay your bills.
Apply for the card!
Once you have finally completed all the steps above – research, asking for advice, saving up, and choosing your card – you are finally ready to apply for your first credit card!
Many credit card applications can be completed online but some credit cards, especially for smaller banks, may require you to go in person to a branch to pick up an application. Whatever the case is, make sure you fill out your application accurately and send it in!
One note on this step: make sure you do not apply to too many credit cards. In fact, at this stage, you should only apply to one credit card. If you apply to too many credit cards, every rejection that you receive will only lower your credit score.
Therefore, it is important to choose a card that you are certain you will be approved for so that you are not jeopardizing your score before you have even begun to raise it.
Manage your card
Now that you have applied for the card, let’s say that you heard back and you were approved. Once your physical card comes in the mail, it is time to start using your card. However, before you complete your first swipe or tap, there are some things you should do to set up your card.
First, you should download the app of the associated bank or company that you received your card from. This will allow you to check your card balance and details on the go, as well as give you a number of other important features such as being able to deactivate the card if you lose it.
You should also take this time to add your credit card to your digital wallet so that you will also be able to use Apple Pay if you ever forget your card. Lastly, you should enroll in the monthly FICO score service if your card issuer offers it. This will give you a monthly update on what your FICO score is so you can track it over the year.
Now that you are ready to go out and start putting a balance on your card, here is the one key point you need to remember to successfully manage your card. Treat your credit card like a debit card.
Pay off your bill in full every month. DO NOT purchase something unless you actually have the funds to pay off that purchase. By following this golden rule, you will ensure that you never have to carry a balance and pay any interest fees.
If you find yourself in a situation where you have to revolve (or carry a balance over) for a month, then immediately save up and pay it off the next month as soon as possible. This will keep the interest from accumulating so that you do not have to pay interest.
Another good practice is to only use about 30% of your limit if you can. With lower credit scores, I personally have used closer to 80% at times with little impact on my score so make adjustments as needed.
In the end, getting a credit card might be scary, but it should not be. It is a new and exciting part of your financial journey that will enable you to do so many things down the line.
Starting your credit journey now will enable you to reach your other financial dreams easier, such as getting your first apartment or financing your first car. Just remember to treat your credit card like the cash you have in your bank.
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