Ever wonder why college students are swarmed with credit card offers? It’s because credit card companies think students are suckers. Many students make bad choices with credit cards, and credit card companies benefit.

Many student credit cards come with very high interest rates. Interest refers to the money you have to pay if you buy something and pay it off in installments instead of all at once. When you pay something off in installments, you pay an extra fee every month, based on how much you owe and the interest rate. (Almost all loans are paid back with interest payments, including mortgages, car purchases, and student loans.) If you have a low interest rate, the extra money you pay every month won’t be too bad. If you have a high interest rate, you’ll be paying lots of extra money every month, and it may become very difficult to pay off your credit card debt!

Credit card companies are counting on students to spend beyond their means with their credit card. They make a fortune on interest payments from college students.

So, does that mean you shouldn’t get a credit card? No. Actually, most college students would benefit from having a credit card, as long as they use it wisely. If you pay your credit card bills on time every month, you will build a good credit score, which you will need later to make major purchases like houses and cars. In addition, having a credit card for financial emergencies is important. And without a credit card, it becomes difficult to purchase things online.

So, how does one use a credit card responsibly? Here are some credit card do’s and don’ts.

CREDIT CARD DO’S AND DON’TS

  • Do learn how to resist temptation! This is very important. The credit card companies want students to go wild with the freedom of their new credit cards and purchase things way beyond their means. Don’t do it! You don’t want to start your adult life out with a huge credit card debt.
  • Do make your payments on time every month. If you don’t, a negative mark will be made on your credit report, and your credit score will suffer for the next seven years! As a young person, your credit card may be the only thing on your credit report, so that one mistake could affect your ability to buy a car or house later on. Late payments also come with late fees.
  • Do pay your credit card balance off every month, if possible. If you always pay the bill in full, you’ll build credit without having to make interest payments. If you can’t pay the full bill, pay as much as you can.
  • Do always pay more than the minimum payment. If you only pay the minimum, you might never pay off the credit card bill.
  • Don’t purchase more than your credit card’s limit. If you exceed the limit, you will be charged a fee.
  • Do read the fine print. Make sure you understand the terms of your credit card agreement. Many credit cards come with six months or a year with zero percent interest, which sounds great, except that after six months the interest may skyrocket. if you don’t understand the terms of your credit card agreement, ask your parents or a knowledgeable older person to help you.
  • Do take precautions against credit card theft and identity theft. When shopping online, be very selective about giving your credit card number to businesses. Never give your credit card number to anyone who calls you on the phone. If the caller has a legitimate reason to have your credit card number, ask them for their number and then call them back. Always read your credit card statements carefully to make sure no one has stolen your credit card number and made purchases. If this happens, call your credit card company immediately. It’s also a good idea to shred credit card receipts.
  • Don’t go crazy with online spending. Shopping online is so tempting. You can buy just about anything you can imagine online, and you don’t even have to leave your room. If you shop online wisely, you can save money on used books and other things you need. But be careful!
  • Don’t rely on your parents to bail you out. They’re going to be boiling mad. And even if they’re not, this is no way to learn fiscal responsibility, which is extremely important.