Many cases of student credit card debt could have been avoided if they only learn good practices of handling their first credit card early.
In the news, an example of a young adult was shared concerning his experience of handling his first credit card.
Accordingly, he exemplifies the problem that every Americans have concerning credit education.
The instance is a good opportunity to point out the very basic education that should be taught to every young credit cardholder.
Things you Have to Know about Credit Cards
Student Credit Card Debt – Practices to avoid itOn Credit Limit
Credit limit is the first element of student credit card debt. This credit limit is usually low, and that makes sense. Since as a student, you do not have credit history to show, and the bank does not have any idea how will you respond owning a credit card.
The only thing that you probably understood at this point is the ability to charge as much as you can, as long as it does not exceed the maximum credit limit.
On the Credit Card Bill
Just as with any debt instruments, credit card company provides you with the option to pay your bill in full or a portion of the total amount and deal with the balance later.
However, you should know what will happen if you opt to pay for only a small portion.
Interest will be imputed to the balance that will basically increase the amount of your purchases.
What is an interest? You may ask. Interest is the charges made by the credit card issuer in order to extend your credit that is over the grace period. It is computed according to the APR percentage. Therefore, lower APR means lesser debt to roll over every month.
Assuming you only paid for the minimum amount, the remaining balance is not the only amount you owe the following month.
The balance will be added with finance charges, and when the interest is calculated, it will compound the total amount to be paid. This means that interest will be imputed over the balance of the principal and its corresponding finance charges.
Good Practices to Avoid Student Credit Card Debt
- The best practice in maintaining your credit card is to pay for the entire amount billed at due date. This will save your for being charged with financial charges and interest.
- You will also be spared with the standard minimum dollar amount being charged by credit card companies, which is regardless of how big or how little you owe.
- Remind yourself to resist the temptation of maxing out your credit limit. Only use your credit card if you know for sure that you have enough earnings to pay for the entire bill when it arrives.
- Be aware also that your credit card activity is being monitored. The issuer of the card has close coordination with credit reporting bureaus. The company must have already reported the time when you got your credit card including the purchases and payments you made.
- It is crucial to always pay on time in order for your credit rating to increase that will eventually provide you with eligibility for a higher credit limit and other potential lines of credit.
Above all, practicing good credit card habits will save you from student credit card debt.