January 22, 2018

Make good credit-building choices while you’re in college

When it comes time to leave the nest and join the higher educational system, new levels of responsibility come to the forefront. Along with classes, grades, friends and dorm room furniture challenges, the need for sound financial decisions becomes extremely important. Even though it may not seem like it, college is the first exposure to big financial decisions; so learning how to organize your finances is the key to success. By developing successful financial habits in college, you can better prepare yourself for larger decisions in your future.

Make good credit-building choices while you're in college

When some people talk about good financial habits they usually suggest avoiding credit cards at all cost. However, developing a good line of credit in college can be scary, yet, it is easier and more beneficial to do in college than after college.

One of the first steps in building your credit is to compare banks and decide which one best suits your needs. Compare the various banks’ options to find the best savings accounts and the best checking accounts, and find a bank that also offers high interest rates and the smallest fees. Based on which checking and savings account you open, you will know if getting a credit card is the right move or not.

If you have decided that getting a credit card is for you, then consider some of the following;

One of the benefits of qualifying for good credit card is that you can often receive rewards such as gas, groceries and other benefits. Many cards earn either points or cash back for every $1 spent. At gas stations, restaurants and drug stores, and many online retailers you can often earn 2x and 3x the rewards. As a students some cards will give you 5% cash back at drugstores, supermarkets, and gas stations.

A card with a low or no annual fee is always good. You’re charged this fee every year whether you use the card or not. Also look for lower fees and penalties for overcharging, late payments, etc.

Another extremely important factor when looking for the right credit card is the Annual Percentage Rate (APR). This is the percentage rate that will apply to your unpaid monthly bill and is sometimes based on your credit history. This is incredibly dangerous for students who have never had a credit card or have not learned from their parents or friends how to properly handle a credit card. When you have a high interest APR card, and you do not pay your balance in full each month, the high interest is added to your unpaid bill. So having the lowest APR is the best choice and some cards offer 0% for an short introductory period.

Regardless of your age the point is to build up a good credit history. Make sound purchases and make sure not to overspend. Making payments on time and getting on a good schedule of monthly payments will help keep your bills within control. One of the most important things to have in the United States is to have good credit. Having good credit will allow you to make larger purchases later in your adult life, like a car or house. It will secure your financial life and make things easier.

 Guest Blogumnist Evan Thomas is a student at UC Santa Barbara and an intern at FindTheBest, an unbiased and data-driven comparison engine. He enjoys playing basketball, hiking and surfing. Evan is conducted hundreds of hours on personal finance research and is currently working on a comparison to help people compare financial advisors. Connect with Evan on twitter: @Evan_Thomas

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