5 Credit Card Tips For New Grads - Business Insider

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If you?re a recent college graduate, you?re probably concerned about all things financial ? from finding a full-time job to renting a home to saving for retirement to dealing with student loan debt.

And in the midst of all that, you?ll have to decide how to use credit cards to better your own financial future.

Responsible credit card use can be part of a healthy overall financial plan. Credit cards, after all, can help you build your credit so that you can someday take out a loan for a larger purchase ? like a home or car ? and they can even net you some great rewards.

But before you start swiping that plastic, consider these five credit card tips just for new graduates:

1. Pay down debts you racked up in college

Over the past two years, the number of college students using credit cards has declined from 42 percent (2010) to 35 percent (2012), according to a report by Sallie Mae. ?This data, however, mask the fact that credit card usage increases as students near graduation. ?The result is that 60 percent of graduating seniors used plastic. ?For those that graduate with a credit card balance, focus on paying that balance down to $0 as soon as you can. This is a good idea for two reasons.

For one, paying high interest rates on a credit card balance doesn?t make much sense. After all, you don?t want to be paying for your school books or pizza outings for years to come. Second, paying down your credit card balance is a smart credit move. The lower the balance you carry compared with your credit limit, the healthier your credit score.

2. Create a budget, and stick to it

The best way to keep from racking up lots of high-interest credit card debt is to make and stick to a budget. While the majority of college graduates are able to find a job, many are still unemployed or underemployed. In this shaky job market, learning how to live on a budget is an essential skill.

It?s tempting, right now, to live beyond your means, charging all the excess spending to your credit card while you search for a full-time job. The key to avoiding overspending is to create a budget that lets you live within your current means ? even if that means crashing in your parents? basement for a few months.

3. Leave it at home

If you?re struggling to live on a tight budget while you job hunt, having a credit card with you all the time could mean extra temptation. Sure, a latte, pair of jeans, or dinner out with friends may not cost much now. But habitually charging your credit card so that you can overspend will run you into trouble eventually.

So if you do have trouble being disciplined with how you use your credit card, just leave it at home. That way, you won?t have it on you when friends ask if you want to go out for drinks that you know you can?t afford.

4. Consider using credit for set expenses

With all this said, don?t avoid using your credit card altogether. Consistently using and paying down a credit card is actually one of the best and fastest ways to build a good credit history. You?ll want that history behind you when you go to take out a car loan or a mortgage in the future.

To stay disciplined with your credit card use, consider using it for set expenses that you know you?ll pay every month. Some people use a credit card just for gas, and others use it to pay things like rent and insurance payments. As long as you pay off the total balance on time each month, you won?t pay any interest, and you?ll build an excellent credit history.

5. Check out the rewards available to you

Maybe the only credit card you have is still one geared for college students. This was a great fit for you in college, but you may be able to get a better credit card now. Many student cards are formulated to help students build credit, but don?t necessarily come with good rewards.

Now is the time to check out what credit cards are available to you, and to find one or two that have desirable rewards. Whether you drive a lot and prefer a cash back gas rewards card or you want to travel with travel rewards, there?s a good fit for you out there. Just do your research, and make sure you check out all the fine print before signing up for a new credit card.

Living within your means, consistently paying down your credit card, and using the right card for your needs will help you build better credit for the future. This means you?ll eventually have access to even better credit cards, and will also be able to get the money you need to buy a home or a car because you?ve built an excellent credit history right after graduation.

Source: http://www.businessinsider.com/5-credit-card-tips-for-new-grads-2013-6

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