How to Keep Your Credit Card in Good Standing as a College Student & Beyond

Do you desire financial freedom, but you are becoming financially entangled in a web of financial destruction?

First Credit Card
Hello World!

 Once you get your first credit card what do you do with it? This is a question I wish I had given a great deal of thought prior to using it for the first time. When I received my first credit card in the mail, I had such a feeling of grandiosity that I thought the world was at my finger tips for the having.  Grant it, I only had a $500 credit limit; but for a young man used to walking around broke that was like having access to thousands of dollars.

Up until that receipt of “credit card moment” I was always the person, when a group of friends went out , who would hang in the back drop hoping and praying that they would not decide to do something that was going to cost money that I didn’t have.  I didn’t like borrowing from my friends and being indebted to others…especially somebody I’d be hanging out with daily.

Ahww, the freedom feeling just having that credit card gave me.  I’d say to myself “come-on world I’m ready for you now.” What a false sense of security that was (and short lived too) once I started receiving the BILLS.  And not being financially literate, BILLS that I had no way of understanding. It was like reading Greek.  So what did I do? Laid it on the desk.  I looked at it every day; and when I looked at it, it was always with this quick thought “You didn’t go away yet?!

Over Due Bills
They Never Seem to Go Away

So to ease the pain of looking directly at it, I’d subconsciously cover it up with homework and research papers and any thing that would keep me from going to the bottom of the pile to see it and having the thought of having to deal with it. That’s only one part of my story about being a “Bad Credit Card User.” If you’ve read thus far, it’s my guess you’ve found something relatable.  I want to shift gears and go from the negative to more of the positive about being a more ideal credit card user.

I can completely understand it if you may be in the dark about responsible credit card use and what is really meant by that term.  Many people interpret responsible credit card use in many different ways, and I’m far from an authority on its true meaning, but I can share with you what I’ve learned over the years of trial and error.accrued-interest

Accrued Interest
Accrued Interest

In general, keeping your credit card account in good standing means that you’re making at least the minimum payment by your billing due date. Some issuers also consider an account to be out of good standing if you’ve exceeded your credit limit, but usually making on-time minimums is all you’ll need to do.  However, it is not recommended you just make the minimum payments. Doing so on a typical $500 credit limit for up to a five-year period could cost you $5000 in interest and fees.

It’s important to note, though, that there’s no single industry standard definition of the term, “in good standing”. If you find yourself in a situation where you need to know what your issuer exactly means by “in good standing”, you should place a call to its customer service line to find out.

Good Standing Seal

Keeping your credit card account in good standing might seem like a simple thing to do. However, according to a 2013 Survey of Consumer Finances, 38.1% of U.S. households report having credit card debt.  That’s more than one third of U.S. households reportedly not in good standing, and borrower’s debt is reported as $5,700 average per household debt.

College students are a big source of revenue for credit card companies. In fact, a study by student loan provider, Nellie Mae, found that college freshmen carry an average balance of $1,585, and a great deal of them don’t even hold a job.  That average balance swells to $2,864 by their senior year.

The lack of adequate financial education for college students, like myself and thousands of others, have gotten and will get us in serious trouble.  When the much higher interest rate on the credit card hits with the other very high fees, we who desire financial freedom become financially entangled in a web of financial destruction. 

Managing Your Credit Card
Managing Your Credit Card

How you manage your credit cards can either set you up for financial success, or it can begin a costly uphill battle of paying down debt for years to come. As mentioned, in the previous post First Credit Card, positive credit card history can open many doors from renting an apartment, to getting a car loan and buying a home. On the other hand, credit card mistakes can have several costly consequences: Dinging Your Credit Score, Causing Higher Interest Rates, Unnecessary Fees and Lowering Your Credit Limits.  Below are a few tips to help you learn some of the best practices with credit card use.

Have You Had the Talk
Have You Had the Talk About Financial Literacy

Start with educating within the family:  Credit card myths just won’t die. According to a bank rate survey 51% of Americans wrongfully believe that having accounts with high balances helps a credit score as long as those accounts are paid on time.  In fact, it only helps if you are only using half of your credit balance because it proves that you do not spend everything you can get your hands on. 

That myth and others provide great examples of why it’s important that the entire family gets an education on responsible credit card use.

It also pays to create a plan for when and where to use your credit cards. For instance, certain cards offer better perks for groceries and home improvement.

Choose your credit card carefully:  Not all credit cards are created equally…especially Student Credit Cards! Just because you have been sent a credit card doesn’t mean its right for you. Take time to research and compare credit cards so that you find one that best matches your lifestyle and spending habits.  Most importantly read the fine print.

Set up your monthly budget:  As a young adult, practice effective budgeting or money management starting today.  Doing so will vastly improve your ability to handle your finances in the future.  Set aside each month a specific amount of money for you to Save and Invest Pay Yourself First, Cover Credit Card Payments and Other Debts, Make Charitable Contributions, and Spend.  If you find that you cannot put anything aside for savings or investments, you are living outside your means and need to take a harder look at your budget and where your hard earned dollar bill is going.

Credit Increase
Credit Increase

Don’t get too excited about a credit limit increase:  A credit limit increase can seem like an exciting reward. For many first-time credit card users the initial credit limit is often between $500 and $900. However, after a few months of responsible behavior, you might receive a higher limit.  I remember how excited I was when the credit limit on my first card was bumped to $1,200 from the initial $500.  I forgot that this wasn’t my money. I didn’t magically have a higher income to pay off the larger amount.

A credit limit increase can help your credit score due to a better-looking credit utilization, if you are only using half the amount of your credit line. Along with not magically have a higher income to pay off this larger amount, this is another reason you shouldn’t spend up to your new limit.  Always remember to live within your means.  If you can’t pay it off in full by the billing date then don’t charge it. 

Don’t casually share your credit card information.  Remember to keep your credit card information private. Don’t give out your account number — or other information — to people who ask for it online, via email, chat, or who call you and ask for it over the phone. Only provide information to those “you” actually contact for a specific purpose. When using your credit card online, verify that you are on a secure site before entering your credit card information.  Secure sites on the internet typically begin with “https://” (the “s” stands for secure) then the website URL.

Keep up with the changes to the terms and conditions of your credit card. You need to pay attention to the materials your credit issuer sends you. Don’t ignore the new credit agreements. Issuers are providing notices in those materials to add annual fees, and increase other fees. If you want to know what’s happening with your card and your money, you need to pay attention.

I hope you will share your comments to help others on one or all the following:

If you can’t pay it off in full by the billing date then don’t charge it. 

You won’t magically have a higher income to pay off the larger amount.

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 It only helps if you are only using half of your credit balance because it proves that you do not spend everything you can get your hands on. 

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It is not recommended you just make the minimum payments.

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You need to pay attention.

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Do you desire financial freedom, but you are becoming financially entangled in a web of financial destruction?

___________________________________________________________Greatest Gift

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