Friday, July 19, 2013

Teach your Kids How to Build Good Credit While in College

After graduating from High School, new financial responsibilities become prevalent in a college student’s life. In addition to college choice and preference, classes, grades, staying in contact with friends, and freshman year roommate stresses, the need for thoughtful financial decisions becomes very important. Although it may be foreign to most incoming freshman, college is the very first exposure to important financial decisions in life. These decisions should not be ignored and learning how to organize your finances can become a key driver in your future financial goals. By practicing and developing effective financial habits in college, you will better prepare yourself for larger financial decisions in the long run.

When discussing successful financial habits in college, people tend to avoid suggesting credit cards. Although this can be great advice, it is important to consider the idea that developing a good line of credit in college will be significantly easier to attain while in school. Establishing a good line of credit can be frightening as it is new and foreign to many students, however it becomes much more difficult after college, stressing the importance you understanding how to build good credit. 

Compare Banks

A good first step in the process of building your credit is to compare banks and asses which one best suits your current needs. It can be helpful to pursue banks that offer high interest rates and minimal fees. I would advise comparing all your bank options to find the best savings and checking accounts offered by prospective banks. Depending on the savings and checking accounts you decide to open, you will know if signing up for a credit card is right for you.

Select a Credit Card

If you have decided that signing up for a credit card is best for you, it should be noted that there are several potential benefits that you may stand to qualify for. One of the benefits of qualifying for a credit card is the opportunity to receive rewards on the essentials in college such as gas, groceries, or cash back for every dollar spent. When using your credit card at a gas stations, drug store, or restaurant, you can often earn 2x and 3x the rewards. Some cards allow you to receive 5% cash back at any of these locations as well.

It is always recommended to look for a card that has a minimal or no annual fee. Whether you use your card actively or not, you will be charged an annual fee. I would also suggest looking for cards that have low fees and penalties for late payments and overcharging. As a college student, this is the time to get your financials organized and finding a card with low penalty fees will encourage you to make better decisions that will keep you on track with your payment and spending schedule.

The Annual Percentage Rate (APR) is important when looking for the right credit card. APR is the percentage rate that is applied to your unpaid monthly bill and can be based on your current credit history. This can be tremendously risky for students who have never owned a personal credit card or have not been taught by their parents or friends on how to properly handle a credit card and statements. If you have a high interest APR card, and you do not pay your monthly balance in full and on time, the high interest is added to your unpaid bill. In any case, having the lowest APR is the best choice and some cards offer 0% for an introductory period. 


Regardless of your age, whether in college or recent graduates, it is important to build a good credit history. Make sure to account for your spending and make wise purchasing decisions. Creating a consistent payment schedule in order to get organized will help keep your bills inexpensive and in control. By prioritizing your credit and making sure to stay updated with your billing statements will allow you to make larger purchases later in your adult life when seeking a mortgage loan or buying a car. Learning how to build good credit will prove to secure your financial life and make financial decisions in the future much easier and attainable.

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