As a college student, new experiences are everywhere — from the classes you take to the financial lessons you learn along the way.
Your first credit card is one of those financial lessons. Whether you’re looking to build your credit history or earn rewards on the spending you do every day, here are five credit card habits to keep in mind from the application process onward.
1. Make sure your rewards are relevant to your lifestyle
If you’re interested in a rewards credit card, your first step should be to narrow down the categories you tend to purchase most in. If you spend a lot on gas or groceries, for example, your best bet is applying for a rewards card that offers points or cash back on those purchases.
If you tend to spend the most on dining out, filling up your tank or swinging through the drive-thru, the Discover it® Student chrome could be a great option for you. The card features 2 percent cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, along with 1 percent back on all other purchases.
Since it’s a student credit card, you’ll get exclusive perks like a $20 statement credit every year your GPA is 3.0 or higher (up to five years), and you won’t owe an annual fee, which can take a significant chunk out of your yearly earnings. Most notably, Discover will automatically match all of the cash back you’ve earned at the end of your first year.
2. Avoid cards with fees and high interest
As a student, you likely won’t do enough spending to warrant a credit card with hefty fees, and you’ll want to avoid cards that charge high interest in case you end up accumulating debt unexpectedly.
Annual fees are charged to your account once a year in exchange for card ownership. That means you’ll need to remember to pay the fee each year and a portion of the rewards you earn will essentially go towards paying it.
There are a lot of no annual fee credit card options to choose from — including student cards — that offer comparable, if not better, rewards structures and perks for those just starting to build credit.
The Petal® 2 “Cash Back, No Fees” Visa® Credit Card, for example, boasts a no-fee policy: You won’t be charged an annual fee, late payment fees or foreign transaction fees on purchases made abroad. As a flat-rate cash back card, you’ll earn 1 percent back on eligible purchases with the opportunity to increase your earnings with responsible card usage. After making six on-time monthly payments, you can earn 1.25 percent back on eligible purchases and 1.5 percent back after 12 on-time monthly payments.
3. Don’t apply for multiple cards at once
You may think that applying for a few cards at the same time will ensure you’re approved for at least one of them, but doing so can actually result in more harm than good.
Each time you apply for a credit card, your credit undergoes a hard credit check. This means your potential issuer may access your credit report to determine whether or not you’re a responsible borrower. A hard credit check can have a small but temporary impact on your credit score.
When you apply for multiple cards at once, multiple hard pulls are made on your credit. These hard credit checks can negatively affect your credit score and may signal to issuers that you’re a risky client.
4. Pay off your card in full each month
A recent survey from Bankrate Credit Cards found that almost a third of credit cardholders have higher balances than they’ve had on average since 2009. With this in mind, it’s more important than ever to develop responsible financial habits before it’s too late.
Many credit cards offer zero percent introductory APR periods on purchases — meaning you can pay off a large purchase for a set number of months without being charged interest on it — but be careful not to abuse this perk.
It may be tempting to overspend with your new card and wait to pay the balance until the end of the zero percent window, but in doing so, you run the risk of not being able to afford the accumulated bill when it comes time to pay it (especially if you miss your zero percent window and interest is tacked onto your balance).
Further, if you have student loans, the combined burden of credit card debt and student loan debt after college could make it difficult to land on your feet after graduation.
5. Track your finances (and your score)
The easiest way to ensure you’re only spending what you can afford is to budget. There are a few ways to do so, but keeping a manual budget or utilizing an app that can track your finances for you are two helpful options.
Many credit cards offer their own apps that allow you to manage your card from your phone. The Chase and American Express mobile apps, for example, let you make card payments, view rewards balances and even check your credit score. More comprehensive budgeting apps, like Mint or Wally, also allow you to manage all your finances in one place and set budgets and savings goals.
While you’re tracking your cash and spending, don’t forget to keep tabs on your credit score. Monitoring your score is key to overall financial health, and a watchful eye can help catch any changes in your score due to reporting errors.