5 Common Mistakes Students Make with their Credit Cards

1. Not having a Credit Card.

You may believe that avoiding the pitfalls of credit cards entails not having any at all, but this is a mistake. Many students make the first mistake of not having a credit card at all. It's important to understand that the term "credit" has two different meanings. It refers to your ability to borrow money, which is determined by how much you already owe (i.e., your debt), and it also refers to your reputation for repaying what you've borrowed (i.e., your history).

If you don't have either of these things— If you don't have either of these things—that is, no history of borrowing and repaying money—banks will be hesitant to let you borrow more because they can't verify that you know how to do this responsibly without getting into trouble. This means that unless you have a cosigner willing to vouch for your financial responsibility, you will not be able to obtain the benefit of credit.

2. Choosing the Wrong Card.

Another mistake students make with credit cards is selecting the incorrect one. Students are frequently enticed by credit cards that offer rewards or other benefits that do not correspond to their spending habits. If you're like most college students, your spending will be concentrated in three areas: textbooks, food, and entertainment. As a result, the best student credit cards are those that provide a high percentage of cash back in these categories while also being forgiving of late payments.

If you carry a balance from month to month, you'll want a low-interest student credit card (Annual Percentage Rate). The annual percentage rate (APR) is the interest rate that is applied to your balance if you do not pay off the entire amount due by the end of each billing cycle.

There are dozens of student credit cards available. Some may be better than others, depending on your situation and preferences. Research the different options and look for low fees, low interest rates, rewards that suit your needs, and other factors. If you have any questions or concerns consult with a qualified professional to help guide you in the right direction

3. Not setting a budget.

Credit cards are supposed to help people manage their finances, but some students use them without thinking. If you are one of these students, it is critical that you understand the benefits and drawbacks of credit cards.

You will not be approved for a card if you have bad credit unless you have a good payment history. That means you should create a budget before applying for any grants or loans. By putting money aside each month, you'll ensure that when the time comes to apply for a card, you'll have enough to cover the fees and other costs associated with opening an account.

Even if you don't have bad credit, you should still create a budget because it will help ensure that your expenses don't spiral out of control when an emergency or major life event occurs that necessitates financial commitment.

4. Not paying your balance in full.

The minimum payment on a credit card is the balance due after the monthly interest charges have been applied to the statement. If you do not pay at least the minimum amount due, you will be charged additional interest, which will raise the total cost of using your credit card in the future.

You may have heard this before, but it's worth repeating: If you're using a student loan to pay off other debt, make sure you pay the minimum payment each month even if the remaining balance is zero. Doing so will keep the amount outstanding on your account low and will help your score at the expense of the overall amount you owe.

5. Closing a credit card you no longer use.

If you're trying to build up your credit score, keep any unused credit cards open and active. This will help improve your average account age and credit utilization ratio. If you want to free up some space in your wallet, consider cutting up the card instead of closing the account. closing a credit card can actually be detrimental to your credit score. If you opened the account and then began using it responsibly, you’re building up a history of good credit with that particular card. Closing the card means that history is no longer factored into your available credit and could actually decrease your score.

If you’re worried about how a specific credit card is affecting your credit utilization rate, consider transferring some or all of the balance to another account or paying it off completely instead of closing the account.

It’s important to note that having a long history of good credit is something lenders like to see when you apply for loans or lines of credit in the future.

Use the advice provided above to avoid common mistakes students make with credit cards!