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Thinking about getting your first credit card? Awesome! Credit can be a really powerful tool – having a good credit rating can help you rent an apartment, buy a car, or may even help you get a job. The downside is that bad credit can have a real impact on your long-term financial future. Carrying debt can hurt your ability to borrow money in the future, can ding you with high interest rates and fees, and a poor credit score can stick around for years. So if you’re looking for some starter tips on using your credit card, look no further than our top do’s and don’ts for using your credit card wisely:
Do: Know your limits
We mean that literally and figuratively. Knowing your credit limit is important so you don’t overspend past your limit (which could result in more fees, a reduction of your limit, or a hit to your credit score) but it’s just as important to figure out what kind of spender you are. While it’s nice to know you could use your credit in an emergencies, if you’re always carrying a balance on your card, that money might not actually be there to fall back on. If you might be the type who finds that extra credit too irresistible, you may be better off sticking to a smaller credit limit like, say, $500, or starting out with a pre-paid credit card that will help you stay on track.
Do: Pay your bills on time
Pay them on time! Pay them! Even if it’s just the minimum payment (and we’ll talk about that in a sec). Timely payments might be one of the most important factors that goes into determining your credit score. And while missing a single payment isn’t the end of the world, missing multiple payments over the course of a couple months can have serious consequences ranging from late fees and higher interest rates to a lower credit score or even the cancellation of your card.
Do: Pay at least the minimum amount
The best-case scenario for responsible credit card ownership is that you can pay off your total balance every month. That technically means you should actually be only using your credit card for things you already know you can afford. But paying off your credit card in full isn’t always possible, especially with a tight student budget. If you find yourself in that situation, don’t just ignore the charge – pay the minimum amount for your billing period. By making a minimum payment, you’re keeping your account in good standing. If you find you can’t regularly make your minimum payment on your card, that’s a sign your finances might need a serious overhaul.
Don’t: Use credit you don’t understand (AKA credit isn’t free money)
A credit card isn’t your money – it’s money you’re borrowing from a bank. You have to pay it back, along with any interest you may have collected. That means the money available to you on a credit card isn’t actually an extension of your budget, even though it might feel like it. Credit card ownership is actually a lot of responsibility (yes, yes, we sound like a nagging parent, but it’s true) and it’s a long-term responsibility, too: debt and bad credit can follow you around for years.
Don’t: Get a credit card from anyone who offers one
It might sound weird, but you should be shopping around for your credit card. Different cards will have different interest rates, fees, features, rewards, and penalties for things like late payments. And lots of banks even offer student credit cards that offer no annual fees and other perks – so don’t just sign up for the first offer you run across. We’d especially warn against signing up with anyone who promises that you’re “pre-approved”, “pre-screened”, including anyone soliciting you in public. Taking your time to make an informed decision could make the difference between spending your hard-earned cash on a bunch of fees or scoring those sweet, sweet cashback rewards.
Wait! I still don’t get credit!
Don’t panic! You’re not alone; things like credit scores and interest can be confounding, and sometimes it’s impossible to figure out where to start. That’s why we’ve partnered up with Momentum, a Calgary organization, to bring financial literacy workshops to Mount Royal University. The Peer Support Centre (PSC) regularly offers free financial literacy workshops, so keep an eye on the PSC page for dates.
The Peer Support Centre is also a great resource if you find you’re financially in a tight spot. If you think an emergency student loan might help you out, please stop by and speak to the Peer Support Centre Coordinator about exploring some options.
Peer Support Coordinator
Office: Wyckham House, Z210