Practical Credit Card Advice for Students: Top 6 Tips for New Card Holders

Using your credit card for the first time can be daunting. I mean, most of us got our first credit card as we began first year, just starting university where everything seems to be unfamiliar; new people, new school, and for some of us, a new country with unfamiliar cultures and laws.

It took me several months and a lot of nudging from wise friends to activate and use my credit card. The very idea of debt and interest scared me. The first time I used my credit card was at a food truck on campus buying a $6 hot dog just to test if it works or maybe test my level of comfort with owing the bank money.

It wasn’t until a guest lecturer who worked in credit management came to one of my business classes that I took my credit expenses and score more seriously.

Lucky for you, you do not need to sit through a two-hour lecture or speed type notes. Here is a quick breakdown of 6 credit tips to take your score from meh to AMAZING!

1. Full Payment for Your Balance Every Billing Cycle

This is often an overlooked rule however, it is crucial to pay your full balance within the period of your two consecutive statement closing dates – AKA billing cycle – which is usually between 28 and 30 days depending on your institution.

Doing this allows you to enjoy an interest-free grace period for most credit cards, whereas balances that are carried over from one billing cycle to another incur compound interest. You end up paying more which messes up your future budgets. It might work now but you are slowly digging a hole for yourself as the balances accumulate which might be difficult to climb out of.

On a more positive note, paying on time improves your credit score; it signals to the lenders that you are trustworthy and a low-risk customer. You can also qualify for rewards, bonuses and exclusive offers. This is also a sign that you are not living beyond your means, you can pat yourself on the shoulder for great credit management.

However, it is not always realistic to pay the full amount every month, life happens. Whether it’s that one-time-only expensive vacation with friends or an inevitable health emergency, do not beat yourself up; pay at least the minimum amount you are required to make every billing cycle. This does not exempt you from interest, however, it prevents late fees and negative marks on your credit score.

PRO TIP: Pay in full consistently, one slip will not completely mess up your credit score or your budgets.

2. Always Pay on Time

When I first started using a credit card, I did not set automatic payments because I did not plan on ever using my credit card frequently. I knew the date by heart, but I often had silly panic attacks towards the end of the month because sometimes I would forget that today is the 25th and my bill was due. The good thing is that your bank sends you reminders every month, but sometimes you miss those emails or texts, especially when you are busy with midterms, assignment deadlines, or part time shifts. Things like this can slip your mind – and that’s okay!

PRO TIP: Set automatic payments for total or minimum payment at the end of your billing cycle.

3. Keep Your Credit Card Utilization at 30% or Less of Your Total Limit

According to experts, keeping your balance between 10%-30% of your limit is ideal because it shows lenders you can use credit responsibly without relying too heavily on it, which helps strengthen your credit score and overall financial reputation.

Students usually qualify for the $1000 credit limit. 10% of that is $100 which is often not realistic, however 30% of that is $300 which is attainable. If you find it difficult to spend only this much every billing cycle, you can always pay that amount in full or in part before spending more.

PRO TIP: What boosts your credit score isn’t how often you pay, but making sure your balance is below 30% of your limit on your statement closing date.

4. Only Spend What You Can Afford

I cannot emphasize this enough, credit card allowance is not an extra income. It will be a huge mistake to intentionally include it in your monthly budget, vacation budgets, etc. That is just money you will have to pay back in due time, its purpose is flexibility and convenience. Do not take on unnecessary credit.

Around the holidays in particular, it is easy to fall into temptation and buy stuff we do not really need. We are in a season where consumer spending is at its highest in North America. From Black Friday deals to Cyber Week discounts, and Christmas and New Year’s gifts and get-togethers, it’s easy to get caught up in the hype and use your credit card carelessly.

PRO TIP: Do not let the holiday spirit sleigh you into debt. Spend smart each holiday season!

5. Monitor Your Statements

It’s easy to fall into a routine of passive spending with auto payments to our favourite streaming network subscriptions and other necessities like phone bills. It certainly makes things easier. However, your statement which you receive at the end of every billing cycle may contain errors from these transactions, fraud, and theft. Just take a few minutes, no more than half an hour each month, to go over your bank statement and reconcile with the receipts of your transactions in that period to ensure accuracy.

This might seem like a lot of work at the beginning – I used to hate it too – but with time you get used to the routine and you can do it in 15 minutes or less. Besides, identifying faults helps you track and reflect on your spending habits, especially online spending, which can help you improve your lifestyle habits. For example, you may be vaguely aware that ordering fast food is not good for both your physical health and financial health but still do it, but seeing that you spent $200 on it in a month can be a true wake up call.

One fun suggestion I got from a personal finance professional is… a date with your finances! Yes, you heard that right! Put on that nice outfit, head to your favourite coffee shop, sit down and sip on your matcha while doing your money math. This makes the task more fun and cultivates a positive relationship between you and your money.

PRO TIP: Find a favourite spot and regularly give your bank statements and budgets your undivided attention there. Thank me later.

6. Know Your Credit Card Terms & Conditions

We are often tempted to scroll past long pages of terms and conditions and just agree to them, blindly acknowledging that we understood them when in fact we did not read them. Well, we may often get away with that, but with your credit cards – or really, all banking accounts you are ever going to open throughout your life – read them vigilantly. Take your time!

PRO TIP: Take your paper work home before committing to anything so you can go over it carefully without pressure.

Bonus Tips

• Choose rewards that align with your typical spending habits, for instance, as a student living in a self-catering residence like HOEM, a credit card that earns points on household and grocery spending is more beneficial.
• Avoid cash advances – they charge higher fees than when you use your debit card.
• Understand what credit score means, and why it matters.

A Key Point to Remember

You can always find more specific and credible information on credit cards on your bank’s official website or connect personally with your financial advisor.

And finally, I’ve put together a few resources if you are interested in learning more:

I hope you’ve found these tips useful, and try not to fret. You’ll be a credit card pro in no time!