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The weeks leading into the holidays are busy ones, especially for college students. There are final exams to be taken, travel arrangements to be made and tons of presents to be bought for family and friends. When you finally have some free time to do a little shopping, it may be tempting to go over budget if you find the perfect gift for someone on your list. You may figure that, because you have a credit card, it’s OK to splurge – after all it’s not on yourself! However, secretly overspending as Santa is never a good idea because little debts can quickly grow to be big debts, especially on credit cards.
As soon as you get your hands on your first credit card, your mantra should be, “don’t charge it if you don’t have the cash.” Using a credit card as a means to buy whatever you want is a big no-no. Although it may not feel like you are using real money when you hand your card to the cashier, what happens with each and every swipe is that you are borrowing money from the bank that must be paid back.
Students in particular stand a higher chance of defaulting on their accounts and accumulating large amounts of credit card debt, according to experts. While it may not seem like a big deal during the moment you are at the mall and want to buy that super expensive present for your best friend that you just know she will love, piling up the debt can have a very real, very negative effect upon your future. If you muck up your credit history at a young age, you may not be approved for a loan in the future when you finally decide that you want to purchase a big ticket item such as a car or a house. Also, having bad credit can ruin future job prospects. Some employers review the credit report of their prospective hires as part of the interview process in an effort to determine their level of responsibility. If you have a shoddy credit history, a potential employer may interpret this to mean that you are not a good candidate for the job.
Here are some basic rules of thumb when it comes to using your credit card:
Don’t spend what you don’t have.
It’s fairly simple – do not make any charges to your credit card that you aren’t able to pay off right away.
Keep close tabs on your spending.
It is essential to keep track of everything you spend, no matter how trivial the transaction may be, in order not to completely blow your budget. This is especially true when you are purchasing items with your credit card, as you don’t have the tactile sensation of parting with your money like you do when you are spending cash.
Go over your credit report every year.
Everyone is entitled to one free credit report each year. Be sure to get a printout of your report so you can monitor the activity to make sure nothing is fraudulent and also so you can know how it looks to potential lenders, landlords and employers.
Use cash often, but not all the time.
While spending cash is one of the best ways to make sure you stay on track with your budget, it’s important to use your credit card once in a while and pay off the balance right away to establish positive activity for your credit report. Also, if you plan to shop online or in a crowded store during the busy holiday season, using a credit card can protect you against fraud by giving you the opportunity to dispute charges.