3 Tips for Helping Students Use Their Credit Cards Wisely
Here are some tips to help you avoid making mistakes that can negatively impact your credit score and financial health.
1. Make your payments on time and don’t have more debt that you can handle
Make it a priority to pay your bills by the due date as payment history is one of the most important factors in your credit scores. Set up automatic payments to help you avoid missing payments that can have a negative impact on your credit scores.
Also it’s not difficult to fall into the “buy now, pay later” mantra this can lead into thousands of dollars in debt. Your monthly debt payments shouldn’t add up to more than one-third of your income. Having more debt that you can handle can jeopardize your long-term financial goals as your credit score reflects your ability to borrow responsibly.
2. Keep your credit utilization low and don’t open too many credit cards.
Experts suggest that the total credit utilization ration should be below 30%. For example if your credit card has a limit of $15,000, you would want to aim to avoid having $4,500 in charges on the card at any given time. Keeping your debt low and making on time payments help make you more attractive to lenders.
Be careful as it might be tempting to apply for several credit cards that can lead to hard credit inquiries which can affect your credit and make it difficult to keep track of your spending and payment due dates. Also, canceling an older card can also lower your credit score as lenders care about your credit history and the longer that history the better.
3. Avoid annual fees and take advantage of credit card rewards
Not all credit cards are the same. The best student credit cards typically charge $0 annual fees, which makes it less costly to keep your credit card account open for a longer period of time.
Choose a card with rates and fees that match your lifestyle. Look for how and when your interest rate might increase, what actions carry fees, and how the issuer will charge for overseas transactions. For instance, if you can’t avoid carrying a balance, choose a card with the lowest interest rate you can find. If you intend to pay off the balance each month, you might look for a credit card with a rewards program, although it may carry a higher interest rate. A credit card that offers cash rewards might help you save. If you are going to be spending money anyway, you might as well get cash back and other rewards to help you build your financial wealth
To decide which cards may be best for you, you’ll need to fully understand the issuer’s credit card policy agreement. Remember that although you might use credit cards like cash, they can have an impact on your financial goals. Take the time to consider credit cards in the context of your budget and financial goals and figure out what makes the most sense for your situation.
Tips to Evaluate the Best Checking Account for You
Opening a checking account allows you to easily deposit a check you receive, take out cash with your debit card for daily transactions or set up direct deposit to receive your paychecks. Unfortunately, many financial institutions charge maintenance fees that can cost you up to $15 a month if you don’t meet their requirements. You may be able to waive the monthly fee if you meet certain requirements, such as maintaining a minimum balance or setting up direct deposit.
If you spend more than the amount in your account, you may be hit with a HUGE overdraft fee averaging around $30. This can be avoided if you enroll in overdraft protection, which will decline transactions greater than your checking account balance or transfer extra funds from a linked savings account.
Checking accounts should not be used for long-term goals, such as saving for a house, since you generally earn a low interest rate. However, some banks may provide a bonus or the chance to earn slightly more interest if you keep more money in your account. Since checking accounts have low interest rates averaging .04%, it’s better to put large amounts of money in savings accounts with interest rates at or over 1%.
When selecting which is the best checking account for you, consider the following criteria:
- No monthly maintenance fee
- No minimum balance requirement
- Low initial deposit of $0 to $50
- Available nationwide
- Physical branch locations and/or online accessibility
- Large ATM network
- FDIC or NCUA insured up to $250,000
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