Students in college: Tips for responsible credit card use

As a fresh college grad, I can attest that financial management wasn't part of my education. You’re expected to figure it out as soon as you join the workforce, making it essential to take control of your financial knowledge before stepping into the real world.

In the past year, I’ve encountered valuable financial lessons — some learned the hard way. If you're still in college, it’s an excellent opportunity to start building your credit early.

From the moment you move in until you graduate, you'll face many expenses where a credit card can be beneficial. Getting your first credit card can be daunting, especially as you navigate this new level of spending power.

By mastering responsible credit card use for both occasional and everyday expenses, you can cultivate strong financial habits that will benefit you for a lifetime.

In addition to building your credit, your initial credit card can offer you enticing rewards, such as cash back or points and miles for travel. By the time you finish college, you'll have a solid credit history, which is essential for getting apartment leases, car loans, and mortgages.

While some guidelines for responsible credit card usage may seem self-evident, we’ll discuss all the essential dos and don'ts that can pave the way for a robust financial future.

Become acquainted with the credit card landscape

With countless credit card options available, selecting your first one can be daunting. Conduct some research to ensure you choose the card that aligns best with your lifestyle. A friend’s enthusiasm for a card doesn’t necessarily mean it’s the right fit for you.

At TPG, we aim to empower you to make knowledgeable choices. Begin with our credit card beginner's guide and explore our extensive credit card reviews. Once you obtain a rewards credit card, we’ll show you all the fantastic ways to utilize the points and miles you earn.

Initially, you might not be eligible for any premium credit cards. Most college students have limited income from part-time jobs, or may not have any income at all.

Fortunately, there are numerous credit cards specifically designed for college students, many of which have no annual fee. These can help you start building credit. A student credit card will reward you for common expenses like dining out, groceries, and fuel.

When I first started, I didn’t know any better and chose my initial credit card simply for convenience. Since I already had checking and savings accounts with Wells Fargo, I opened the Wells Fargo Cash Back College℠ Card on my 18th birthday, which offered a modest 1% cash back on all my purchases.*

Although this card helped me establish credit and paved the way for more advanced cards later on, there are student cards available that offer superior rewards rates.

For students seeking their first credit card, I suggest the Discover it® Student Cash Back. There’s no need for a preexisting credit score to apply, which is a significant advantage for students. You’ll earn 5% cash back on a rotating selection of categories every quarter and 1% back on all other purchases. Additionally, Discover will match the cash back you earn during your first year. Plus, it’s a no-annual-fee card.

The details for the Wells Fargo Cash Back College and Discover it Student Cash Back cards have been gathered independently by Dinogo. The information on this page has not been reviewed or provided by the card issuer.

*The Wells Fargo Cash Back College card is no longer accepting new applicants.

Take charge of your own finances

Choosing the right card is crucial for building your credit, but managing your finances is just as vital.

You may already have a checking or savings account, but if your parents have been overseeing it, now is the time to request your own access. Monitoring your money and transactions is essential for becoming financially responsible and independent.

The same idea applies to credit cards. If you and your parents decide to enhance your credit by adding you as an authorized user on their accounts, make sure to ask for access to those accounts.

Some parents might hesitate to share their financial situation with their child, but they should reconsider. By granting the authorized user visibility into the card's credit limit and spending habits, they will be encouraged to make wiser purchasing decisions.

If your parents aren't keen on adding you as an authorized user, don’t worry. This is another scenario where obtaining a student card can be an excellent option.

If you, as a student, choose to open a credit card, it’s essential to monitor your spending and stay current on your payments, as both factors influence your credit score.

Dedicate a few minutes to check your account a few times a week. This practice will help prevent missed payments and avoid unnecessary interest fees. It’s also wise to enable autopay or set a reminder so you don’t forget to pay your bill each cycle.

Establish your own financial objectives

Having clear goals will help keep you motivated — and there's nothing quite like the feeling of achieving a significant milestone.

Your primary aim might be to grasp the fundamentals of credit and establish positive credit card practices. In this situation, focusing on rewards may not be necessary, especially if your goal is to gradually acclimate to using credit cards.

However, if your objective is to gather enough points for your spring break getaway, you'll need to determine your spending requirements to achieve these rewards. It's possible to accumulate sufficient points and miles solely from your welcome bonus, which comes with a spending threshold to meet within the initial months of card membership.

Tips for responsible credit card usage

Upon receiving your first credit card, you gain increased spending capacity. However, it’s essential to remember that this isn’t just "free money," as pointed out by Elly Szymanski, assistant vice president of credit card products at Navy Federal Credit Union. "Make sure everything charged to your card fits within your regular budget. Tracking your expenses and paying off your balance in full each month is vital to avoid falling into debt due to late fees and interest. If possible, consider setting up automatic payments and mobile alerts to ensure timely payments," she advises.

If you're just starting in the realm of travel rewards, it's important to understand the 10 essential rules for travel rewards cards. The first rule: always pay off your balance in full.

Failing to pay your balance will result in accumulating interest, ultimately costing you more for your purchases over time. Most travel credit cards come with high interest rates—though a few may offer 0% APR during an introductory period—so carrying a balance can undermine any rewards you earn in points or miles.

This poor financial behavior can significantly impact your credit score, making it difficult to open new credit cards or secure loans like a mortgage in the future.

If you're cautious about your increased spending capacity and the risks of credit cards, a "secured credit card" could be a wise choice, as Szymanski suggests. "Students should consider starting with a secured card, which can teach you the fundamentals of credit cards and essential money management skills while you're still young. Many secured cards also offer rewards," she notes. These benefits can often be exchanged for gift cards, merchandise, or cash back.

For students using a traditional (unsecured) credit card, it's crucial to manage your finances prudently. Szymanski emphasizes that maximizing the card's benefits is also vital. "Especially with back-to-school expenses on the rise, consider shopping through your card issuer's online shopping portal, if one is available. This allows you to earn bonus points or cash back beyond what you'd receive from in-store or retailer website purchases," she advises.

Another key aspect of credit cards is your spending power utilization, known as the utilization rate. "If your credit limit is $5,000, it’s best to avoid approaching that limit, as high utilization can hurt your credit score," Szymanski explains. "Keeping a good utilization rate can enhance your score."

In summary

Obtaining a credit card while in college can be incredibly beneficial, as debit cards do not provide points or miles and offer limited fraud protection. From building your credit to earning redeemable travel points, the possibilities are nearly limitless.

That said, success hinges on being a responsible first-time credit user. The sooner you cultivate good credit and spending habits, the more accessible affordable travel, auto loans, and home loans will become.