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Finance Tips for College Students

What a High Yield Savings Account is and Why You Should Get One

A high yield savings account is an online savings account that offers a significantly higher APY than a typical brick and mortar bank.  APY stands for Annual Percent Yield.  Annual percent yield is the percent of interest you earn on your money in the account over the course of a year. For example: 

If I put $100 into my brick and mortar bank that has an APY of 0.04%, over the course of a year I would earn an interest of $0.04. 

100 x .0004 = 0.04

However, if I put that same $100 into an online high yield savings account with an APY of 1.00% I would earn an interest of $1. 

100 x .01 = 1

Now you might be thinking, "Okay that's great an all, but why should I care about saving 1 dollar a year?". 

Well, as you add in more money to your savings account, your interest rate becomes more important. The more you have in your savings the more you can earn just by having it sit in a savings account. 

Let's say you have $10,000 in a brick and mortar savings account that you plan to use for college. Using that same APY of 0.04% you would save $4 over a year.

10,000 x .0004 = 4

But if you put that same $10,000 in the online high yield savings account with the APY of 1.00% you would save $100. 

10,000 x .01 = 100

In essence, the more money you have in your savings account, the more money you can earn by just letting your money sit there. That is why, when you are saving large amounts of money, it is much more beneficial to put it into a high yield savings account with a higher APY. 

Some High Yield Savings Account Options (Rates are as of August 2020):

Affirm - 1.30% APY 

SmartyPig - 1.25% APY

Customers Bank  - 1.25% APY

CIBC USA - 1.05% APY

How to Use a Credit Card the RIGHT Way 

Credit cards are a tool. They can be used to save you money or they can be used to acquire lots and lots of debt. However, the good news is that if you use your card correctly you can always come out ahead by saving money rather than losing it when it comes to your credit card. 

The first thing to know about credit cards is that they are not free money. Everything you put on your credit card you must pay back before the end of your billing cycle. If you don't pay off your credit card bill every month you will incur interest fees. All credit cards have APRs, or annual percentage rates. This is the interest rate that credit card companies charge on the money you owe them. Remember how the high yield savings account that pays you money to let them hold your cash? APRs do the opposite, they charge you money for owing them cash. However, you can easily avoid these high fees by paying off your bill at the end of each month.

Why should you get a credit card? Credit cards are a great way to build credit which can help you buy a house, get a loan, or even rent an apartment. Having a good credit score is important and credit cards are one way to easily build credit. Additionally, most credit cards offer cash back where they give you back a percentage of the amount of money you spend on your card (usually 1%). So in this case, if you spent $100 on your card you would be given a credit of $1. 

100 x .01 = 1

Some cards also offer perks, such as free Amazon Prime for a year and higher cashback rates. 

Picking the right credit card is important. Always do your research and make sure you know what your fees are, if any. Since this guide is geared towards college students, I am going to recommend cards that have no annual fee, do not require a high credit score, and have an easily accessible smartphone app. I would highly recommend downloading the app and setting up an automatic payment system so that you never miss a bill.  

Some Credit Card Options for College Students:

The Deserve EDU Credit Card (Must be a College Student!)

• Free Prime Student for 1 Year if you spend $500 within the first three billing cycles
• 1% Cash Back
• No Foreign Transaction Fees
• No Annual Fee
• Smartphone App
• No Social Security Number Required
• Available to International Students

The Petal Credit Card

• No Annual Fee
• Smartphone App
• No Foreign Transaction Fees
• 1-1.5% Cash Back

Discover Student Cash Back Credit Card

• 1% Cash Back on all purchases
• 5% Cash Back on Amazon, groceries, restaurants, gas, and when using PayPal
• No annual fee
• Smartphone App
• No foreign transaction Fees