When you step onto campus as a college freshman, you’ll be exposed to a lot of new and exciting experiences. From deciding when you’ll study to setting ground rules with your new roommate, you’ll be in charge of how you lead your student lifestyle. For likely the first time in your life, you will also be responsible for your own money management. Along with your newfound responsibility, you’ll want to learn more about one of the best tools to help you manage your finances in college: a credit card.
If you’re a college student, getting a credit card may already be on your mind, but before you take on the role of a cardholder, you must first understand credit card basics. Whether you’re an existing cardholder, about to apply, or just curious about credit cards, use this quick guide to learn how responsibly swiping your student credit card can set you up for a great financial future.
What is a student credit card?
A student credit card is a card issued to someone who is currently attending or planning to attend college. As students may not have had an opportunity to start building their credit history yet, this type of card is designed to help them build credit and begin smart financial habits. A student credit card will typically offer a low initial credit limit, so college students can learn how credit cards work without the risk of overextending their budget. It is often the first credit card an individual will have.
How do credit cards work?
A credit card allows you to borrow money from your bank in order to make purchases. First, the credit card provider will establish a credit limit, which is also known as a credit line. The credit limit is the maximum amount of money that you are able to borrow at one time. You can then use your credit card at gas stations, restaurants, shops, and more.
As a credit cardholder, you will receive a monthly credit card statement, which is a summary of your purchases and the minimum amount of money due for that period. Your statement will be sent in the mail or be available for viewing online. You are required to pay the minimum amount, but you will also have the option to pay more than the minimum or even the full balance. If you don’t pay the full amount on your credit card bill before the end of the grace period, you will be charged an interest rate on purchases made during the billing cycle.
Why should I get a credit card in college?
If you’re a college student, you know that expenses can pop up any time. From a pricey textbook to an unexpected evening out with your friends, you never know when you’re going to have to pay for something. Having a credit card can ensure you are prepared for every expense without having to carry cash with you on campus. Besides making your wallet a little lighter, there are many other reasons to get a credit card in college.
1. You'll build credit
Credit can play a huge role in your life, so college is a great time to start building it. Your credit score indicates to lenders your creditworthiness, or how responsible you are with managing credit. For this reason, it’s crucial to begin establishing a good payment history sooner rather than later. Using your credit card for routine payments during the school year, like your monthly streaming service charge or an online textbook subscription, can help boost your credit score.
Your payment history is one of the most important determinants of your credit score. Making just one late payment has the potential to hurt your score, which is why consistent, on-time payments are the goal of successful credit cardholders. Building your credit with responsible habits early shows lenders that you have a good track record, meaning you’ll be more likely to get approved for loans with favorable rates. This additional credit can help you achieve your financial goals in the future.
2. You'll have payment flexibility
As a cardholder, it’s your goal to pay your entire credit card statement on time each month, but credit cards can offer flexibility when that’s not the case. You have the option to pay the balance in full, the minimum payment due, or any amount in between. If you’re short on cash one month, you must pay the minimum payment, but you can carry your remaining balance over to the next month.
Credit cards help make everyday purchases easier, but they can also help with variable purchases, like moving expenses or buying school supplies for next semester. Because these purchases aren’t routinely in your budget, a credit card can relieve some of the burden of paying for these fluctuating expenses right away. Similarly, a credit card can provide you with the option to pay back large expenses over time. Big ticket items like that extra class you were worried about paying for or a new futon for your dorm are now within reach.
3. You'll be ready for emergencies
Credit cards can act as a financial safety net for college students. While the use of a credit card doesn’t replace an emergency fund or the need for budgeting, a credit card can help offer a sense of financial security in dire situations. For example, your car broke down, and you need to pay for it to be repaired, or one of your relatives passes, and you want to fly to the funeral. In both of these scenarios, you may not have cash with you to handle the unexpected expenses.
In addition to helping remedy immediate financial issues, a credit card is a secure and safe way for students to make purchases. Unlike paying with a debit card or cash, you’ll be protected in the event that your credit card is lost or stolen. As a college student, you can sleep peacefully at night knowing that if you didn’t buy an item, you won’t have to pay for it.
4. You'll gain financial independence
Another great perk of credit cards for college students is financial independence. At its core, financial independence involves building good money habits and feeling comfortable with your financial position. Being in charge of your credit card statements and paying your bill on time are good ways to form successful money habits at a young age. Not only does a credit card help you prepare for life after college, but having a credit card ensures you won’t always have to ask your parents for money if you’re short on cash.
As a college student, your class schedule and extracurricular commitments may not allow for you to have a job with a set schedule. This often leads to picking up a side hustle or working inconsistent hours each week. Consequently, your income may not be predictable each pay period. A credit card can help bridge the gap between your lumpy paychecks and your current liabilities.
What can I use a student credit card for?
When it comes to your student credit card, your purchase possibilities are almost endless (as long as the cost is within your credit limit and budget). While having this much buying power is exciting, student cardholders should always keep track of how much they are spending, and prioritize needs over wants. A few 1st Financial Bank USA cardholders shared how they use their cards as a student in the following 1FBUSA reviews.
“This month I used my credit card to buy gas to get to my community college. It has been super helpful to have such a low credit limit, but still build my credit score! I'll be ready to rent an apartment in 2 years with the credit score I'm building up!” - Kaylee, 1FBUSA cardmember from Illinois
“I was running low on cash after buying books for school and I needed a couple of groceries. 1st Financial Bank bridged the gap while allowing me to build my credit history.” - Patrick, 1FBUSA cardmember from Kentucky
“I was able to pay for my college textbooks before my financial aid was posted to my account. It was very helpful and made my summer semester enrollment less stressful.” - Dylan, 1FBUSA cardmember from Nevada
“I started a new job and I needed uniforms and work shoes. My credit card came in handy. I only use it for emergencies and having to pay out of pocket for company attire was indeed an emergency! Thank you 1st Financial Bank for extending credit to me. I will use it wisely!” - Jadon, 1FBUSA cardmember from Pennsylvania
“I was able to use my credit card to buy necessities for dorm life such as towels, bedding, and hygiene products. Without my card I wouldn't have been able to purchase any of those items.” - Abby, 1FBUSA cardmember from Iowa
What is the best advice when using a credit card?
Having a credit card can be a valuable tool for a college student. However, it is important to use it responsibly. While it’s important to acknowledge your credit card expectations, it’s also important to learn from reality. Following these few pieces of advice may help you avoid real-life credit mistakes.
1. Pay off your balance every month
Try to pay off your credit card balance on time and in full each month if you’re able. Not only will you avoid interest and late fees by paying your total bill, but making regular monthly payments can help boost your credit score. Having a good credit score will come in handy when you’re ready to rent an apartment or buy a car. When potential lenders review your credit report, they’ll see evidence of your ability to make payments on time.
2. Treat your credit card like a debit card
Because the money you spend on your credit card doesn’t come out of your bank account until you pay your bill, it can seem like you have more money to spend than you actually do. If you were to think of your credit card like a debit card, it could eliminate the possibility of overspending. For example, if your bank account shows a balance of $350, you wouldn’t allow yourself to spend more than $350 (even if you do have a higher credit line available).
4. Focus on needs, not wants
While there are certain things you should buy with your student credit card (and a few things you shouldn’t), a general rule of thumb is to primarily use your card for your needs. College students have many wants, whether it be an Instagram-worthy vacation, a new pair of sneakers, or the latest technology for school. While all of these items are tempting, only after you make sure you have enough money for your needs, plus a little extra for emergencies, should you splurge on your wants. If you must have a want, make sure you’re saving money by utilizing student discounts or a rewards program.
5. Monitor your account on a regular basis
Make sure you’re keeping up with your account by tracking your payments and monitoring all activity. Your credit card statement can be found on your bank’s app or website, making it easy to manage your account and see your credit card transactions in one place. Keep an eye out for any transactions you don’t recognize, and alert your credit card issuer immediately if you believe you’ve found suspicious activity or evidence of credit card fraud on your account.
Now that these credit card basics are on your mind, you’re one step closer to being a successful student cardholder. The financial skills you’ll learn from having a credit card in college can accelerate your financial goals and help you become a better money manager. With your 1st Financial Bank student credit card, you’ll be able to handle variable expenses and financial emergencies with ease, all while building your credit score for your future. While your lifestyle may not change all that much with a credit card, your financial independence and responsibility will skyrocket. So when you step on your college campus for the first time ready to try new things, we recommend adding a student credit card to your list of exciting experiences.