Tuesday, June 16, 2009

Put your student credit card on autopilot

Put your credit card on autopilot. A student credit card is ONLY used to establish good credit. Ignore how your friends use their credit cards (“Dude! I rack up some many points and get all this free stuff!”). A credit card is ONLY used to establish good credit.

It’s a steep learning curve (and you’ve got other stuff to study), don’t waste your time getting burned by it when you’ve gone all this time without a credit card. Cash is king.

1. Take your time choosing a good credit card (no annual fees being the most important factor) from a good bank (not a retailer) as you will have to keep your first card for a long time to establish a good history (when you switch, you lose out).
2. Set up auto-billing to your credit card with your fixed monthly utilities.
3. Set up a separate chequing account for your fixed expenses like rent and utilities (hopefully you’ve already set up a 2-3 month buffer for your fixed expenses like rent and utilities)
4. Send a debit preauthorization form from your chequing account bank to the payment processing center of your credit card. The full balance will automatically be paid off every month.
5. Store your credit card in your filing cabinet and forget about it; it’s on autopilot.

Other tips: Credit card scores grow the fastest when the credit use is a fraction of the total credit limit (10% is great). Call your credit card company every 6 months and ask for an interest rate reduction. You don’t use it or need it, which is why they’ll give it to you. By the time you graduate, you’ll have gone from their ridiculous interest rate down to something reasonable/comforting if you every run into a medical emergency in your family and need to carry a balance. Pick one. Be loyal. Reap the benefits of a long term relationship.

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