College is an excellent place to start learning about the importance of credit and credit cards. When using secured or student credit cards responsibly, students can build and establish a solid credit history in anticipation of future financial decisions and opportunities. That could include qualifying for valuable rewards credit cards and better loan interest rates.

Learn how credit and credit cards work

The concept of credit is ultimately simple: You’re borrowing money, and it’s your financial responsibility to pay it back. If you don’t pay it back, you typically have to pay interest and/or late fees. If you only make a minimum payment, you must pay interest according to the annual percentage rate (APR).

Making purchases with a card and paying off your balance on time is a responsible way to use credit cards. This helps build your credit history, which lenders look at when determining whether to offer you credit, often in the form of a credit card or loan. It also creates solid financial habits for reaching your personal finance goals.

You might have little or no credit history on your credit report as a college student. That immediately rules you out for most travel credit cards and other cards with higher credit qualifications. However, you could qualify for a student or secured credit card with less strict eligibility requirements.

Consider a student or secured credit card

There’s a catch-22 with credit cards — they can help you build credit, but many require a good credit history to qualify. But how can you qualify for one (to help build your credit) if you have no credit history?

Fortunately, student credit cards and secured credit cards exist. These are ideal first credit cards because they’re designed for people with little or no credit history or people who are (in the case of some secured cards) rebuilding their credit.

The difference between a secured vs. unsecured credit card is that secured cards require a security deposit. The deposit acts as collateral, and the amount usually equals your credit line. For example, a $300 security deposit gets you a $300 credit limit on many secured cards.

Apart from the required security deposit, secured cards are nearly identical to unsecured cards. You can use them anywhere they’re accepted and most of them, if payment activity is reported to credit bureaus, can help you build your credit history.

Check out our top credit cards for college students

Only spend what you can afford

Credit is sometimes mistakenly viewed as free money. While that’s a nice thought, it’s not true. Part of creating good spending habits is only using as much credit as you can afford to pay off.

For some people, it’s difficult to reconcile the fact that you’re using real money when you aren’t physically handing cash to someone. On top of that, using a credit card doesn’t automatically lower the money in your bank account if you make a purchase. So, there’s a sense of being able to use money without any repercussions.

For this reason, we recommend treating your credit card more like a debit card. With a debit card, you can only use what you have. Having that same mentality with a credit card might make it easier for you to manage your money.

Always pay on time

The most significant risk with credit cards is getting into credit card debt. That only happens if you make purchases and don’t pay off your balance on time. “On time” means paying your balance in full before your credit card issuer collects interest and/or charges late fees.

Many credit card companies compound interest daily, which is interest charged on top of interest. Since most credit cards have high interest rates, compound interest can quickly get out of control with high unpaid balances.

Consider automatic payments to ensure you always pay your balance on time. Most financial institutions let you link a bank account to make automatic payments before your balance due date.

Start with one credit card

There’s no need to rush into the world of credit cards if you’re just starting out. Using one student or secured credit card for a while, such as six to twelve months or more, can help you learn how credit cards work. It gives you time to practice making purchases and payments and also lets you establish a positive credit history that can benefit your financial future.

Keep a low credit utilization ratio

Credit utilization is one of many factors that affect your credit score. Your credit score is a numerical representation of your creditworthiness, or how likely you are to use credit and pay back lenders responsibly.

Your credit score can go up or down depending on your actions involving credit products, including applying for credit, having active loans (including student loans) and credit card accounts, and making on-time payments.

Your credit utilization is how much credit you’re using of your available credit. For example, making a $500 purchase on a card with a $1,000 credit limit would put you at 50% utilization. It’s recommended that you stay under 30% credit utilization to avoid impacting your credit score.

Begin learning about benefits and rewards

As a credit card beginner, your primary goal with credit cards should be learning how to build your credit history, which entails making purchases and paying off your balance on time.

However, you can also start learning about credit card perks and rewards simultaneously.

Rewards credit cards offer points, miles, or cash back on purchases. These cards give cardholders incredible opportunities to earn valuable rewards on purchases they’re already making.

Many credit cards also provide extra perks and benefits in addition to rewards. These could include purchase protection, cell phone protection, travel insurance, and more.

Frequently asked questions (FAQs) about credit cards for college students

Is it worth getting a credit card for students?

Compared to loans, student credit cards provide an excellent and interest-free way to build your credit. You won't have to worry about late fees or interest charges if you pay your credit card bill in full monthly and don’t make late payments.

How does a student credit card build credit?

Using a student credit card to make purchases and always pay your bill on time can help you establish and build your credit history. In particular, your payment history is a huge factor in determining your FICO score, one of the most popular credit scores lenders use.

What are the drawbacks of a credit card for students?

Student credit cards typically have high interest rates, which could quickly lead to debt if you don’t pay off your monthly balance. In addition, student cards don’t tend to have as many benefits or earning opportunities as top rewards credit cards.

Read more: How to build credit without a credit card

This article was edited by Rebecca McCracken

Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn't include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.