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What to Do With Your Student Credit Card When You Graduate

What to Do With Your Student Credit Card When You Graduate
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Providing clarity for all of life's financial decisions.
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By Ben Luthi

What happens to your student credit card when you graduate? Among the options are continuing to use it as long as you want, canceling the card or applying for a new one. In some situations you'll be better off, however, if you don't cancel the card. Here's why.

Higher credit limit:
When you applied for your student credit card, your credit limit was relatively low because you were new to credit and didn't have much of an income. On one hand, a low limit makes it easier to stay out of debt. On the other, it puts you more at risk of having a high
credit utilization ratio
, which can hurt your credit score. Now that you've spent some time establishing a good credit history and have a full-time income, it's likely you'll qualify for a better card with a higher limit. Not only will this give you greater spending flexibility, but it will also help you keep your utilization ratio low.

Better rewards: Some student credit cards have decent rewards for your everyday spending. But now you have a greater chance at qualifying for a rewards credit card with a high rewards rate and a big sign-up bonus because you've established good credit behaviors and you earn more money.

You're ready to move on: As you enter the "real world," you may be moving on to a new city, a new job or a new apartment. With all the changes that are happening, using a student credit card might make you feel like you haven't finished the transition. While this reason may be more emotional than practical, it may make you feel better to leave the "student" label behind.

Potential for more debt:
If you aren't in control of your spending, having a credit card with a higher limit could get you into debt. One way to combat the urge to overspend is to keep a monthly budget. However, if you feel like the temptation would still be too strong, it may be best to stick with the card you already have.

It can hurt your credit score to cancel: One of the factors that goes into your credit score is how long your credit accounts have been open. The longer you keep a credit card open, the better. So instead of canceling your student credit card, consider using it sparingly to keep it open and active to help boost your score.

Perks: You may not want to part ways with some of the rewards or perks that your student credit card offers. For example, you may get bonus rewards on purchases you make frequently, or your card may be tied to an online bonus mall where you can score big discounts. If this is the case, adding a second card with a different bonus rewards categories and features may help you maximize your rewards.

When you graduate, consider keeping your student credit card, even if you don't want to use it regularly.

This article originally appeared on NerdWallet.

Ben Luthi is a staff writer at NerdWallet, a personal finance website. Email: bluthi@nerdwallet.com. Twitter: @benluthi.

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