Dos and Don'ts of Using Credit Cards Responsibly

The basics of credit card usage for high-school students and older.

It is important to be educated about credit cards and how they work – even before one starts using them. The tips that follow encourage healthy spending habits for new and experienced credit card users alike. Students should be reminded of these important tips.

Don'ts

• Don't use your credit card to make everyday purchases like food and clothing. Get in the habit of using cash or a debit card for ordinary purchases.
• Don't get into the habit of making minimum-only payments. Making only the minimum payment each month increases the amount of time it will take to pay off debts. Also, making minimum payments will result in increases in the amount of interest paid. To pay debts off quicker and cheaper, you should pay as much as you can on your balance each month.
• Don't use a credit card to buy things you can’t afford. If you can’t afford a purchase today, chances are you won’t be able to afford it tomorrow, or even next month.
  
• Don't close out a credit card without knowing how your credit will be impacted. There are times when closing a credit card can hurt your credit score. Avoid closing cards that still have a balance or those that make up a significant amount of your credit history.

Do's

• Do make wise decisions about purchasing items you need versus those you simply want..
• Do let your creditor know in advance if you won’t be able to make your monthly payment on time. The worst thing you can do is simply forgo your credit card payment, no matter the reason. Explain the situation to your creditors; they will oftentimes help you by waiving fees or providing other means of assistance.
• Do stay within 30% of your credit limit. A large part of your credit score considers the amount of debt you have. Keep your balance low to maintain a good credit score.
• Do negotiate a lower interest rate. Especially if your current rate is higher than offers you receive. Check the interest rate on your credit card regularly to be sure you are getting the best deal possible.

More Credit Card Smarts

A common trap that many young adults fall into is signing up for a credit card at college, where companies hound unassuming students – giving them a free T-shirt in return for a credit card signup. While this might sound harmless, the fact is, many students armed with new credit cards find that their spending oftentimes spirals out of control. Warn students about these types of situations – and encourage them to be steer clear to avoid getting into debt. Review these crucial do’s and don’ts with your students to reinforce the importance of responsible credit card use.