Remember the number one rule of credit cards: don't spend money that you don't have.

The college student's guide to credit cards - Part 3

By: Danielle Bly

Posted: 11/20/09

Throughout the past two articles, I've discussed credit cards in detail, giving you information about the pros and cons of credit cards, and how to evaluate credit card offers. For that information, visit The Observer online at www.cwruobserver.com. This week I'll be explaining how to manage your credit cards responsibly once you own one, and will discuss a few alternatives to credit cards.

How to manage credit cards responsibly:

Once you choose a credit card, it's easy to get into trouble with late fees, overdraft fees, and paying the minimum balance. Here are some basic money management tips that can help you stay out of financial trouble:

Pay in full every month: When you decide to own a credit card, commit from the beginning to pay your balance in full each month. I know from experience that it can be tough to pay in full each month, but by forcing yourself to pay you will avoid a lot of long-term problems in the future.

Leave your card at home: If you're going out and know that you won't need the card, leave it in a secure place at home. There is no temptation to spend if you don't have your card.

Pay your credit card several times a month: Most credit card companies offer online bill payment. Set up an account for your card, and use it to pay your balance throughout the month. This will help you avoid a large bill at the end of the month, and keep you from spending over your limit.

Use mini-budgets: Most people have one or two areas where they tend to overspend each month (clothes, electronics, etc). Try creating a mini-budget for these areas to help you spend less.

Keep credit card rewards in perspective: Although credit card rewards like cashback and points are great, they should never be used to justify a purchase. These perks can sometimes cause you to overspend, so be cautious with them.

Stop using the card if you accrue a balance: It can be easy to get behind on your credit card payments or not to pay your bill in full each month. If you find yourself in this situation, commit to shelving your card until the balance is paid. If the card is too tempting for you, give it to a family member or trusted friend to hold for you while you pay off your balance.

Consider credit card alternatives: If your credit card debt begins to spiral out of control, it could be time to cut up your credit cards and consider one of the alternatives to credit cards listed below.

Three alternatives to student credit cards:

Credit cards aren't the only convenient and widely-accepted payment methods available. Financial institutions have developed some unique alternatives that feature many of the same benefits that credit cards offer. These alternatives can help to eliminate some of the dangers posed by credit cards.

Bank debit card: A bank debit card or ATM card is tied to your checking account. When the card is used, the amount spent is automatically deducted from your checking account. This type of card does not build credit history, but it eliminates the possibility of overspending because you can never spend more than what's in your checking account. Generally, most bank debit cards use Visa or Mastercard, so you can use them practically anywhere.

Charge card: Charge cards are different from credit cards because they must be paid in full every month. Most American Express cards are considered charge cards for this reason. These cards allow you to build credit history while making sure you do not overspend.

Prepaid credit cards: Prepaid cards allow you to put a set amount of money on this card, and you cannot spend any more than what is programmed. This eliminates the risk of overspending. These cards can also be used anywhere credit cards are accepted.

Final thoughts on student credit cards:

While credit cards offer convenience, security, and financial rewards, they also come with potential risk. It's critical for students to understand the many benefits and pitfalls of credit cards before opening an account. When you do decide to get a credit card, manage your money effectively to avoid any potential problems. This will help you build your credit history and earn points while doing it! Always remember the number one rule of financial management - Don't spend money that you don't have. Stick to this golden rule, and credit cards will benefit you for years to come.