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Using Credit Responsibly

How to use your credit responsibly...learn the best way to manage your credit limit and credit cards. This will help you maintain the highest and best credit score possible. Stay out of student debt with these excellent tips on credit management.

Many people are exceptionally concerned about credit cards these days. And with good reason. While a credit card can be a useful tool, providing rewards and other perks, a credit card can also represent a slippery slope. Indeed, if not used carefully and responsibly, a credit card can create debt problems for a student, leading to painful interest payments and other issues that can lead to a cycle that is hard to break.

The good news is that credit cards are not evil – anymore than money itself is evil. For a student, a credit card can be a financial tool. However, you have to use credit responsibly as a student. When you use credit cards – and other types of credit – responsibly as a student, you can actually build a good credit rating and reap several other benefits.

Advantages of using credit responsibly as a student

The first thing to understand is that credit is useful only when you use it responsibly as a student. The habits you develop now, can lay a foundation for your financial future. Good financial habits can also help you as you move on to take care of other credit related purchases:

• Buying a car. You will get a better interest rate on your auto loan if you have a good credit history. This can mean a savings of thousands of dollars over the life of your car loan if you get a better interest rate. You will also be able to take advantage of special offers and financing if you have used credit responsibly as a student.
• Buying a home. One the most important factors (likely the most important factor) that lenders look at when you go to buy a home is your credit score. This is a reflection of your credit history, and all lenders want to see whether you are likely to make regular payments on your mortgage. First of all, your credit will be used to decide whether you even get a loan. Then the lender will look to see what interest rate you get.
• Getting a job. You may not think that your credit decisions as a student matter in your future job, but it might. Many employers now are looking at credit as part of hiring decisions. They want to know whether you are responsible, as well as whether you are likely to embezzle or take bribes (due to the fact that you have money problems).

Tips for using credit responsibly as a student

If you want to use credit responsibly, there are some things you can do to develop good habits with regard to your credit:

• Carefully consider your purchases. The first step to using credit responsibly as a student is to consider your priorities. This means that you need to carefully consider your purchases. Before using credit to buy something, first determine whether or not you would normally make the purchases anyway, and whether it is a need or a want. It is important to limit your purchases to items that you are most likely to buy in the normal course of a month.
• Budget your money. Do not spend more than you have. Remember this: A credit card represents a loan. It is not income. When you use a credit card, you have to pay it back. This means that you should not spend money that you do not have. Live within your means. That’s the first rule of using credit responsibly as a student.
• Pay off your credit card balance each month. Part of using credit responsibly is paying off your credit card balance regularly. It is best to pay it off every month so that you do not have to pay interest charges. However, if you do carry balance, you do need to make minimum payments every month – and on time. If you do not make payments on time and at least the minimum, your credit score can be damaged, and if you don’t pay off the balance off in full, you will have interest payments, and that is how you get stuck in a debt cycle as you get used to having debt.

Your years as a college student are pivotal, even for your personal finances. What you do as a college student can lay your financial foundation for life, giving you a head start. Indeed, the first step to good personal finances is developing good credit habits as a student. A credit card can help you build a good credit history – if you are responsible as a college student.

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