If you were lucky enough to get through your undergrad years without ruining your credit score, you can expect the same temptations in graduate school. Credit card companies frequently target grad school students since they know students have many expenses with no full time job. While it’s common for most grad students to have at least one card, the living expenses associated with grad school can lead to crippling debt if credit cards aren’t handled responsibly. Here’s how to resist the urge to “charge, charge, charge.”
- Check out your school’s credit union. Often schools have associated credit unions that offer students better interest rates on credit cards than big companies like Capital One or Citibank. The lower the rate, the less you will ultimately be spending. Check the fine print on offers for hidden fees. Don’t just sign up for the first credit card that offers you a free t-shirt or stuffed animal! You’ll definitely be paying for it in the long run if your interest rate is double.
- Pay off the card at the end of the month. Don’t carry a balance. Make sure to only charge what you can realistically pay off at the end of the month. As each balance carries over, it will increase the amount of money you have to pay. Most students wind up in debt because of compound interest, not because they charged too much on their card initially. If money is tight, make more than the minimum payment.
- Follow the “one and done” rule. The ideal grad student should have no more than one debit card and one credit card. If you are worried about exceeding your credit line, call your credit card company and ask them to raise your limit. It’s much easier to keep track of a large balance on one card, than three or four cards with smaller amounts. Don’t exceed your limit either, since companies will charge you over-the-limit fees.
- NEVER take a cash advance. Cash advances on credit cards have the highest interest rate. You will pay finance charges plus a special “cash advance” fee. Don’t be tempted to think of it as “free money”—you’ll pay much more later on than you realize!
- Always know what you owe. Good financial acumen starts with good organization. Keep a notebook with your updated balances, interest rates, credit lines, etc., and update it every time you make a payment. Most credit card statements are accessible online. Check your statements a minimum of once a week. Keep your credit card statements and bills in a special file, so you can easily refer to them, and check them for inconsistencies and unexplained charges.