College students often juggle a busy schedule filled with classes, social activities, and career-building efforts. Amidst these responsibilities, gaining valuable life skills for adulthood is essential. One crucial skill to develop is effective credit building. By learning how to manage credit wisely while in college, you’ll be better prepared for your financial future after graduation.

A first credit card can be a useful tool for learning money management when used responsibly. Here are seven tips for college students to help you start building a strong financial foundation:

1. Understand that your primary goal is building credit

While flashy advertisements and enticing offers for credit cards may catch your eye, remember that your first card is primarily a tool for building credit.

Use this opportunity to set a budget and develop responsible financial habits, such as paying bills on time and spending within your means. You can monitor your credit score for free using tools provided by your card issuer or through credit bureaus like Experian. Given your busy college schedule, leverage these resources to keep track of your financial health and stay on top of your responsibilities.

2. Decide which purchases to make with your card

Creating a budget involves not just deciding what to buy, but also determining how you will pay for it.

Your first credit card may come with a low credit limit, possibly as low as $200. To make the most of this, consider using the card for specific monthly expenses or purchases, such as:

  • Streaming services
  • Bus or public transit passes
  • Gym membership
  • Monthly prescription refills
  • Campus dining card reloads

If your student credit card offers rewards for certain types of spending, like gas or dining, you might choose to use it exclusively for those categories.

Be cautious not to exceed your credit limit. Your credit utilization—how much credit you’re using compared to your total available credit—accounts for 30% of your FICO score. To maintain a healthy credit score, aim to keep your utilization below 30%. For a $200 limit, this means keeping your balance under $60. If you approach this limit, consider paying off your balance to stay within the recommended range.

3. Stick with one card

Once you’re eligible to apply for a credit card, you might find several options available. However, while you’re in college, managing just one card is usually sufficient for your needs.

Applying for multiple cards in a short period can lead to hard credit inquiries, which can negatively impact your credit score. Sticking to one card simplifies the process of building credit and fits better with your busy student life.

To explore your card options and assess your approval chances without affecting your credit score, use Bankrate’s CardMatch™ tool. This tool performs a soft credit check, which doesn’t impact your score, and provides personalized offers and preapprovals from various card issuers.

Remember: Preapproval is not the same as final approval. The credit card issuer will make a final decision only after you submit a full application.

4. Only spend what you can pay back

Your credit limit represents the maximum amount you can charge to your card, but it doesn’t mean you should spend up to that limit.

Remember, you’ll need to repay whatever you spend. If you can’t pay off your balance quickly, you’ll accrue interest, increasing your total repayment amount. Many college students are on tight budgets, so it’s wise to only charge what you can afford to pay off in full each month to avoid interest charges.

Try to avoid the cycle of making only the minimum payment, if possible. Paying just the minimum can lead to accumulating interest and make it harder to reduce your debt.

5. Always pay on time

Payment history is the most critical factor in your credit score, accounting for 35% of your FICO score. Therefore, it’s essential to make your credit card payments on time.

Regardless of how hectic your schedule might be with classes and social activities, prioritize paying your credit card bill by its due date. Setting up automatic payments can simplify this process and ease your mental load.

If you’re unable to pay the full balance, ensure you at least make the minimum payment to safeguard your credit score. Keep in mind, though, that you’ll incur interest on any remaining balance.

6. Build credit first, earn rewards second

When you first get a credit card, your main goal should be to establish a strong credit history through responsible use. Good credit now can pave the way for access to more desirable credit cards in the future.

While student credit cards may offer benefits like low or no fees, welcome bonuses, and rewards on everyday college expenses such as groceries and gas, it’s important to remember that rewards are less valuable if you’re carrying credit card debt. Focus on making timely, full payments and using your card responsibly before chasing rewards.

7. When in doubt, pick a student card as your first card

As a student, you have access to a valuable option in the credit card market: the student credit card. These cards are specifically designed with students in mind, offering benefits tailored to your needs.

Typically, the best student credit cards come with fewer fees and more favorable APRs compared to cards available to non-student borrowers with no credit history. Additionally, many of these cards provide the option to upgrade to a standard credit card after graduation.

In Conclusion

A credit card can be a powerful tool for building a strong credit history and credit score early in life, potentially accelerating your path to significant financial milestones like purchasing a home. Developing good credit requires maintaining positive habits consistently. With your first credit card, focus on paying your bills on time, managing your spending wisely, and earning rewards responsibly. By following these practices, you could be well-positioned to qualify for additional credit cards and financial opportunities in just a few years.