Statistics show that young people are the group of people that suffer from the highest bankruptcy rate. The major factor that contributes to this is because of the debt that piled up from using a credit card during their college years. Because of this, you should just get one credit card first to build up your credit history when you are studying at college. You only need a single credit card to do all your shopping.
Having a credit card is like giving you access to extra pocket money and you can use the card to pay for your everyday expenses. Payment history accounts for 35% of your credit score. If you consistently make a payment every month, you will be able to slowly build up your credit score. When your credit history is build up, it will be easy for you to rent a place or buy a car when you get a job after graduation. The card can also be used as a financial means for covering emergency expenses.
A credit card can help you to develop financial responsibility if you use it correctly. You must remember that whatever you spend on the credit card need to be paid back. So, you should not treat it like free cash and just spend it on anything you want. You should note down the due date or set a reminder on your phone for the due date so that you are not late in payment.
If you are not careful in spending money with the credit card, you will find yourself falling into a debt trap when you can’t come up with the money to make payment by the due date. Missed payments can result in bankruptcy and a bankruptcy record can stay on your credit report for up to 7 years. Missed payments can also cause large negative impacts especially on someone with poor credit history.
If you max out your credit card, your credit score will take a big hit and it will make your life harder when you come out of college. All the money you earn will be going to paying the credit card debts that you wreck while at college. If you don’t want this to happen, you should stay within a budget when you spend money on credit card.
It is recommended that you don’t spend more than 30% of the credit limit on your credit card. Keeping to this limit can prevent your credit score from dropping because one of the factors the credit bureau uses in calculating the credit score is debt usage ratio. Students should monitor their credit scores to make sure that their credit score is increasing to higher and higher instead of dropping.