Role of parents in student credit card

There is a need of parents assistance for co-signing before getting a student credit card. The parents must be aware that their children are using it properly. They can guide them regarding comparing and selecting the right card. Some credit cards have low limits and this makes the students spend the money carefully. Some of these have no annual fee, 0% APR or a rewards program. Sometimes the reward may offer something for free, like a gasoline card for free gas.

Tips for student credit card usage

1. How you use your card now affects your financial future (credit score) – If you have a large balance that is maintained by only making the minimum payment, you’ll be considered a “credit risk” by the FICO (who sets the credit score criteria) and your credit score will go down.  This affects buying a car (higher financing rates) and even insuring your car (higher financial risk = higher payments). Keep this in mind if you are racking up big bills without the cash to quickly pay them back. Read more about your credit score.
2. Stay within your credit limit to avoid penalties and reserve available credit for emergencies. Demonstrate that you have capacity, the ability to pay back your debt, by keeping your account balances less than 50% of your available credit.
3. Don’t carry a balance – When possible, avoid carrying a balance. As stated above, it’ll keep your credit score lower than average and will also increase the amount of money you ultimately have to pay. This is due to the wonderfully painful phenomena of compound interest, which can severely increase your balance, even if you no longer use the card.
4. Limit the number of credit cards you acquire to help limit your debt exposure and simplify your record keeping. Be aware that excessive credit inquiries over a short span of time may be interpreted as an indicator that you need more credit due to experiencing financial problems.
5. Watch your interest rate – The higher this is, the more your balance will increase each month. If you can begin with a 0% rate or transfer to a credit card that will offer a similar low rate, it is certainly recommended. Just be careful of what that low rate becomes, once the initial offer vanishes.
6. Consider rewards cards – For those who do pay their bills, it’s worth looking into cards that provide cash back, miles, hotel points, or a similar bonus for using your credit card on a regular basis. Just be wary of annual fees, as they can offset any bonuses you may earn.
7. Try to pay your balance in full each month. Otherwise, make sure you send more than the minimum payment required.
8. Prepaid cards aren’t ideal – If you think you’ll have a lot of difficulty paying off your balance, a prepaid card provides you with plastic, similar to a gift card you may get at a retail store. However, it doesn’t improve your credit, it won’t do much for you in emergencies, and there are very rarely options for rewards.
9. Carry cash, too – Studies have shown that consumers spend less when they are using cash instead of plastic. So, you may wish to leave your Visa at home when you hit the mall.
10. Debit cards aren’t always best – The nice part about debit cards is that there is no balance, and your money is pulled directly from your bank account. The negatives are that it doesn’t allow you to improve your credit and if it gets stolen, thieves have direct access to your money – even though card companies say there is no liability.
11. Set your own credit limit and start to establish a savings fund for emergencies.
12. Use the telephone – Getting hit hard by your APR? Give your card company a ring and ask them if they can lower your rate.  Have to make a late payment? Clear it with your card so you won’t incur late fees. Card companies want to keep you as customers and are more than willing to do favors for you, periodically. In turn, they hope that you slowly (but surely) keep your balances with them.
13. Pay on time. Send a payment check well before the due date to avoid late fees and finance charges. Your credit score, a numerical reputation of a consumer’s financial creditworthiness, used by lenders to determine whether they should lend money to a person, and if so, at what interest rate, can most adversely be effected by late payments, collections, and bankruptcies.
14. Use credit wisely. Ask yourself the following questions before purchasing with credit: Is this something I really need, and do I need it now? Do I have the ability to repay? How long will it take me to repay? How much will it ultimately cost me?
15. Be aware of the terms and costs when shopping for a student credit card.
16. Review your statements carefully and immediately inform your credit card company, in writing, if you notice an error on a billing statement.
17. Review your credit reports periodically and check for inaccurate, incomplete or outdated information. Dispute this information, in writing, with the credit bureaus.
18. Be honest. If you can’t pay your bills on time, contact the creditor and explain the situation. Creditors will often work with you to come up with an alternate payment arrangement. You can also contact Consumer Credit Counseling Service of Southern New England, Inc. for assistance at 1-800-208-2227.
19. Always think ahead. Be proactive, not reactive, about your finances. Plan for different obligations now and after graduation.
20. Be organized by filing your statements in a separate folder.
21. Keep a list of your credit card account numbers and phone numbers in a safe place in case a card is lost or stolen.
22. Report your card as lost or stolen as soon as you notice it’s missing.
23. Immediately inform your credit card company of an address change.
24. Avoid opening joint accounts with a friend or significant other.
25. Protect your account numbers, personal identification numbers (PIN’s), and social security number. Do not let others use your cards and don’t use your cards to pay for other people’s purchases!
26. Try not to graduate with credit card debt. If you do, make sure you will be able to afford that debt in addition to other new expenses (i.e. student loan payments, rent, utilities, etc.).
27. Consolidate your credit card debt, if you have any, by transferring high interest rate balances to 1 low interest rate credit card. Apply the interest rate savings towards your outstanding balance to pay your debt off more quickly.
28. Ask for a lower interest rate if you have credit card debt. Creditors will be most flexible if you have demonstrated responsible credit behavior.
29. Be sure to pay your student loans as agreed. This long history of paying your bills on time will also help you build a credit history and improve your credit score.
30. Never pay an annual fee: Whenever I see a credit card offer the interests me, I always look to see what the annual fee is. If the annual fee is more than $0, I don’t even consider the card. Credit cards earn money when you use them, they charge the merchant a small fee, there’s no reason why I should pay them for the opportunity to make them more money!

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