A student credit card sets you on your journey to financial well-being. However, you can only achieve that if you pay your bill on time, avoid overspending, and are aware of otherd common student credit card mistakes.
With good management – and by using a top student credit card – you can build a good credit rating and history, which will help when you graduate. On the other hand, you can end up in debt, making things worse if you already have student loans.
The following guide points out many of the common mistakes students make with their credit cards, and offers tips on how to avoid these pitfalls.
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1. Paying your bill late
Your payment history highly influences your credit score over time. Anytime you make a late bill payment, your score can drop significantly. The more you delay, the worse it gets.
To avoid this, you should set up automatic payments; that way, your bills get paid even if you forget the payment date. You can set up automatic payments irrespective of your credit card service.
2. Paying the minimum payment only
You can make only the minimum payment whenever you can’t pay your balance in full. However, don’t make this a habit, or you’ll make a big student credit card mistake.
Paying only the minimum amount on your credit card appears affordable but it can actually be really expensive since you’ll end up paying more interest and credit card charges over time. Therefore, always target to pay your balance in full.
3. Overspending
Maxing out your credit card is never a good idea, whether you’re a student or not. Unfortunately, many students make this mistake because they feel they aren’t exchanging money (it’s just a plastic card, right?!).
Wrong!
To avoid this, you should make a monthly budget and stick with it. Track every expense you make, no matter how insignificant. You’ll have less of a balance to clear out at the end of the day.
4. Not reporting a lost/stolen credit card right away
One Ontario student landed $14,000 in debt after failing to report her lost RBC credit card. You can learn from her experience by immediately reporting your lost or stolen credit card.
It’s simple. You only have to contact your card issuer, and they’ll cancel the old card and issue you a new one. So you’ll be safe should the old card get into the wrong hands. It’s one of the first things you should do if you find yourself with a lost wallet.
5. Applying for more cards than you need
Ultimately, you want to improve your credit score. According to the Canadian Government, one of the best ways to do this is by limiting the number of times you apply for credit.
Therefore, applying for more cards than you need is a student credit card mistake you should avoid. Having too many credit cards gives lenders the impression that you always rely on credit. It portrays you as an overspender – applying for a credit card can hurt your credit score if you’re applying for too many at once.
6. Not getting a credit card
It sounds ironic but navigating university without a credit card does more harm than good. You should only not get a credit card if you’ll never need to apply for credit in the future – which is improbable.
Your chances of getting credit depend on your credit score, and you can only build your credit score with a good credit history. Therefore, getting a credit card as soon as possible is wise, and using it appropriately to start building your credit history.
7. Getting suckered into applying for a credit card on the spot
You’ll meet marketers from time to time urging you to register for credit cards. This is especially prominent during “welcome weeks” or “clubs days” where there are tons of booths vying for your attention.
You should not give in to their eloquence and promises. The bottom line is they only want to make money for their employers.
Making impromptu applications is a student credit card mistake you must avoid. Before applying for any credit card, conduct in-depth research into what the lender offers. From here, you’ll find out if you’re going to reap in rewards or whether you’re better off without their slick offer.
Best student credit cards you can apply for
Managing your student credit card will be easier if you use a reliable service. Therefore, we also researched the best student credit cards you can apply for. Here are 2 cards that could be useful for those just getting started out in school.
Best overall student credit card
$20 GeniusCash + 5% cash back for the first 3 months + No annual fee.*
If you’re looking for the cream of the crop, look no further than the BMO CashBack® Mastercard®* for students.
A lot of people assume you can’t get a high-end credit card with premium rewards, but this card is an excellent start. Here’s what you can earn with it:
- 3% cash back on groceries (up to $500 per month)
- 1% cash back on recurring bill payments (up to $500 per month)
- 0.5% cash back on all other purchases
Assuming you buy groceries instead of going out to eat every day, and also assuming you’ll have to pay for necessities like Netflix, you’ll get bonus rewards on both. You’ll also get something back for your other purchases, something that other super-basic cards can’t offer.
You’ll also be looking at a welcome bonus of 5% cash back for the first 3 months, up to $2,500 in spend. It’s great for your first semester and getting everything you need to settle in.
Of course, students (and their wallets after the gut-punch that is a student loan) will be more than relieved to know that this card doesn’t come with an annual fee.
Best prepaid card option for students
If you want a safer option to avoid making any major student credit card mistakes, getting a prepaid credit card may be the way to go.
A prepaid credit card is one that you pre-load with your own money. That way, you'll avoid one of the biggest student credit card mistakes: overspending. You can't spend what you don't have and you won't find yourself fighting to get a balance off your back. Just note that you can't build your credit score with this card.
The EQ Bank Card is an excellent card in this regard as you'll get rewarded on your purchases, which isn't always the case with a prepaid credit card. You'll get None, which is certainly better than nothing.
If you're looking to travel, you're in luck too – this card charges no foreign exchange fees. Perfect for any upstanding citizen's responsible trips to a Mexican resort.
Have you made any other student credit card mistakes?
With all we’ve discussed in this post, you should now know the common student credit card mistakes to avoid. Fortunately, avoiding them isn’t a mammoth task.
You can begin applying the solutions and make your journey towards an excellent credit score. Have you fallen victim to any of these student credit card mistakes? Do you have any advice for our future generations?
Let us know in the comments below.
FAQ
What happens if I pay my bill late on a student credit card?
If you pay your bill late, you incur late charges. The amount may be minor, but it becomes significant over time.
What happens if I only make my minimum payment on a student credit card?
If you only make the minimum payment, you’ll accumulate more interest, which means more balance to pay off. Also, you’ll be in debt for much longer.
What’s the best student credit card?
The best student credit card you can use right now is the BMO CashBack Mastercard for Students. You’ll earn up to 5% cash back on your purchases with no annual fee.
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