How to Use a Student Credit Card Without Getting Debt

The best way to avoid going into credit card debt is to make sure you don’t spend more than you are prepared to pay off. If you pay off your balance in full every month within your credit card’s grace period, you won’t incur any interest and you’ll stay free and clear of debt.

Staying ahead of debt is simple in theory, but in practice, it’s often challenging for those who are just starting to become aware of their financial needs and spending habits. Student credit cards are becoming especially helpful tools for learning how to use credit cards responsibly without as much risk of getting into debt.

Features that help students avoid debt

Lower credit limits

It’s not uncommon for new credit card users to accidentally overspend, which with regular credit cards can lead to a significant amount of debt. Lower credit limits ensure your balance is manageable.

Low intro APR

An APR (annual percentage return) is the interest rate that applies to your balance after you make your payment. Normally to ensure that you don’t incur interest, you have to pay off the entire balance, but a low intro purchase APR gives you a period of time where you can pay anything above the minimum and incur little to no interest on your balance.

This gives you additional time to catch up on your balance without being charged a high interest rate. It can give an extra cushion for big purchases such as a semester’s worth of textbooks or a spring break trip, but remember that if they’re not paid down by the end of the intro period they will start earning interest at the ongoing interest rate.

Key habits to help students avoid debt

Make a budget

A budget doesn’t have to severely restrict your spending, but rather make a plan so that you can always make informed spending decisions. That way you can set spending parameters for yourself.

Track your spending

No budget is ever set in stone — college students will have surprise expenses ranging from meals and classroom materials to spontaneous trips and events. Being aware of how close you are to your budget will help you make sure you can afford the things that are important to you.

Pay off your balance on time and in full

Making timely payments not only keeps you out of debt, you also avoid late fees and start building a good credit history.

Take advantage of bonus offers

If you pay off your balance in full every month and take advantage of cashback offers, you earn statement credits that can effectively help stay within budget when you use your credit card.

Maintain a good credit utilization ratio

In other words, avoid spending close to your spending limit and keep your utilization rate around 30% or lower. Credit utilization is the ratio of your outstanding balance to your credit limit. If your balance is $250 and your limit is $1,000, your utilization rate is 25% and it increases with your outstanding balance.

Keep in mind that your credit utilization ratio accounts for all of your balances and credit limits combined, but you’ll still want to avoid maxing out any one card. This helps you avoid building unmanageable debt, and also looks great to credit bureaus.

Source: iQuanti, Inc.