5 credit card tips for new grads
Credit cards can come with a temptation to live beyond your means -- and that can quickly lead to trouble. But manage your cards well, and you can reap rewards later.
American college students tend to have a rough time with credit cards. Without much real-world personal finance experience, many spend beyond their means and graduate with credit card debt. And even for those who are lucky enough to complete school without debt, the threat continues to loom after graduation.
So how can recent graduates enjoy the convenience and security of credit cards without getting into trouble with debt? Here are a few tips:
1. Keep it simple. It is easy to get caught up in the hype promoting credit card perks and rewards, but these benefits are not worth it if they lead to debt. Instead, recent graduates should focus on finding cards with the fewest fees and the simplest terms.
2. Always pay your balance in full. This is the single most important piece of advice that can be offered. Those who pay their entire statement balance each month avoid costly interest charges, and there isn’t a better time to get in this habit than after graduation. And the lesson of living within your means, instead of on hoped-for future earning, applies well beyond credit cards.
3. Get a card where you bank. The easiest way for new grads to manage a credit card account is to open the account at the same institution where they keep their checking and savings accounts. Since most retail banks and credit unions offer credit cards, customers are able to manage all of their accounts from one website. Living within your means then becomes a simple matter of ensuring that the outstanding credit card balance is less than the funds in their checking account. In addition, paying bills is just a transfer of funds between two accounts within the the same institution.
4. Don’t get too many credit cards. Recent graduates should focus on managing their money responsibly, not acquiring new accounts. Therefore, limiting yourself to one or two credit cards is the best strategy until you’ve gotten in the habit of making sound personal finance decisions.
5. Start saving now. It’s a tough job market out there for new graduates, but many are still finding great jobs. And when paychecks start coming in that dwarf their pre-college earnings, it is easy to get excited. But what many successful grads fail to appreciate is that a first job is likely just a steppingstone along a career. A once-promising position can disappear overnight due to myriad reasons, many of which will be out of their control. Graduates need to save their money for the time that they may be between jobs for several months. And if all goes well, those savings can eventually fund a retirement plan, or a down payment on a home mortgage.
New college graduates need to step into the world of credit cards with extreme caution. By taking a conservative path for now, they will build the high credit scores necessary to take advantage of the fancy reward cards later.
More from Credit.com:
- The first thing to do before applying for a credit card
- 5 things you should never put on a credit card
- Can you really get your credit score for free?
I say never get a credit card from the bank where you keep the rest of your money, especially if you're a new grad. It could take months to land a full-time job, and it's possible (although clearly not desirable) that you might have to lean on your credit for a little while. Best to make sure you aren't suddenly penniless because your bank decides you're no longer a good enough risk.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
A Fidelity study found that adult kids and their folks aren't on the same page when it comes to discussing finances.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'