How To Use a Credit Card Wisely as a Student

As a student taking their first strides into adulthood, you might find yourself navigating newfound financial responsibilities. From managing expenses within a limited budget to shaping your personal lifestyle, there are several facets to consider. Alongside the cloud of responsibilities, the silver lining of opportunity exists—this is the ideal time in one’s life to cultivate financial literacy and develop habits that will last a lifetime. One of the key learnings is to understand the world of credit cards. More specifically, learning how to use a credit card wisely.

Good credit card usage habits will not only help you get through the financially stringent student life but also set you up in the long run with healthy credit scores, debt management, and making big financial decisions with ease.

Let’s delve deeper into why knowing how to use a credit card wisely can be a blessing as a student.

Learn how to use a credit card wisely as a student

1. Getting started on the right foot for a strong credit score

Being a student means you’re likely confronted with plenty of material goods to buy. But if you use a credit card with disregard, you could end up in debt before you know it. Your credit score serves as a critical factor in your future financial endeavours, influencing your capacity to secure education loans at low-interest rates. So, it’s smart practice to learn how to use your credit card wisely to start building a good credit score early on.

2. Building healthy credit habits early on

Every rupee matters, especially if you’re a student without a substantial source of income. That’s why it’s crucial to develop good money habits like keeping track of what you spend and budgeting. Getting used to budgeting and savings at an early stage will set you up for success in the future.

3. Getting used to budgeting for bills

Credit cards offer the convenience of buying products right away, but they also come with responsibilities, like managing bills. Using a credit card wisely requires you to have a steady income and ensure timely payments. Missing a bill payment can lead to penalties and added interest charges. It highlights the importance of maintaining a disciplined approach to paying your bills on time.

How to gain maximum benefits on your credit card

1. Time your spending habits

If you are tight on budget, try and time your big purchases for seasonal and festival sales, where merchants offer maximum discounts on credit card purchases. Doing so helps you get a huge bang for your buck with season or festival-specific offers. Keep an eye out for odd end-of-season sales or back-to-school discounts where you can get good offers on stationery, school products, and clothes.

2. Prioritise your bill payments

Understand and track your credit card bill payment cycle diligently. This will give you the freedom to plan your purchases and pay off your bills before the due date. Paying on time helps you improve your credit score and helps you build a better credit profile. Your profile is likely to receive credit card upgrades with higher limits as you continue paying bills ahead of time.

3. Understand how to earn rewards and cashback

Collecting rewards/cashback wisely to clear your credit card bills is akin to an art. Having a credit card as a student helps you start practising it sooner rather than later. Keep yourself updated with the latest merchant offers. See if your credit card comes with a reward points program. For example, here is how One Credit Card’s reward points program works. It offers a 5X benefit for your top two categories every month.

4. Keep your credit card balance in mind

Always remember to keep a watchful eye on your credit limit as you spend. Going on a shopping spree and maxing out your credit card only looks pretty in the movies. It is best to keep track of your credit utilisation ratio (total spend divided by total credit limit) so that your credit score is not limited. Experts recommend maintaining a low credit utilisation ratio. Consistently spending around this margin lets your credit card issuer know you are a wise spender and helps unlock higher credit limits for your card.

Knowing how to use a credit card wisely can ensure you get the most out of one of the most important financial tools at your disposal as a student. Building a good credit score can help you navigate the daily student life rife with daily spending. If you are wise with your usage, your credit card will be a stepping stone towards a strong financial future.