Congratulations, you’ve graduated from college and you are about to begin your first summer in “the real world.” Once your cap and gown are stored, your diploma framed, and you’re looking forward to your first day on the job, it’s time to turn your attention to your personal finances. And with that comes a lot of responsibility, especially when it comes to using credit cards.
Here are five credit card mistakes that you might make during your first summer after graduation, and what you can do to avoid them.
1. Not Prioritizing Your Debt
Ideally, college students would graduate with little, if any credit card debt. But unfortunately, many still begin their careers owing a significant amount because of credit card charges, on top of what they owe for student loans. And while student loans have lower interest rates and the interest can be tax deductible, credit cards, especially student credit cards, have very high interest rates that are never tax deductible.
Nevertheless, many graduates start a new job and begin to splurge. The sudden steady income goes to things like buying a new car, furnishing a new apartment or even paying down student loans. Yet the smartest move is likely to pay off credit card debt as quickly as possible in order to avoid spending more on those high interest charges. You can use this tool to figure out how long it may take you to pay off any credit card debt you might have.
2. Incurring More Credit Card Debt
It can be easy to get carried away with your credit cards and assume that you’ll be able to pay them off quickly thanks to the money you’re getting from your new job. Sadly, this is how many recent college graduates find themselves trapped in a cycle of debt. Instead, consider seizing this opportunity to begin a lifetime habit of never charging anything you can’t afford to pay for. By paying each month’s statement balance in full, you’ll avoid interest charges and problems with credit card debt.
3. Failing to Make Payments On Time
When you graduate from college, you are likely to move, start a new job, and be faced with many new responsibilities, all at once. But accidentally missing credit card payments in the midst of all the new experiences you’re having is a huge mistake, as an important factor in your credit score is a record of on-time payments. To avoid this problem, make sure to update your address with your credit card issuers, and keep close tabs on your accounts by viewing them online from wherever you are. Better yet, consider enabling automatic payments to help ensure you are never late on any payments. You can view your free credit report card, updated every 14 days, on Credit.com to find out how your credit card or student loans payments are affecting your credit score.
4. Not Updating Your Credit Card
As a college student with a limited income and little credit history, you likely got the student credit card you were eligible for, or one designed for customers with average credit scores. But once you graduated and find your first job, you’ll likely start to have a stronger credit history and more income to report on your application, which means that you increase the odds you qualify for a new credit card with more competitive terms. Therefore, you might consider applying for a card with a lower interest rate, travel benefits or rewards for spending. (You can read about some of the best cash rewards credit cards in America here.)
5. Avoiding Credit Cards Altogether
While it’s very important to use credit cards responsibly, fear of misusing them causes some college graduates to avoid credit altogether. The problem with this strategy is that you reduce your chances of building the credit history necessary to get the best rates on other loans, such as a car loan or a home mortgage. If you are worried about your use of credit cards, you can figure out when and where you’ll use them to best benefit your credit history. Keeping your accounts open and in good standing can really be a long term benefit to you.
More on Credit Cards:
- Credit.com’s Expert Credit Card Shopping Tips
- An Expert Guide to Credit Cards With Rewards
- How Secured Cards Can Help Build Credit