Student Credit Cards: If You're Going to Do it, Do it Smart.
With all the risk and headaches associated with student credit cards, it can sometimes seem like a good idea to avoid getting a credit card at all until you’ve graduated. But that’s not always a good idea. Using a credit card sparingly and responsibly can build your credit while you’re in school, which could make it easier for you to buy a car, get an apartment, or even reduce your insurance premiums when you’re out of school.
It may be a good idea to get a card—but there’s a right and wrong way to choose and use one while you’re earning your degree. Here are some guidelines on how to build your credit without increasing your college debt.
Choose the right card
Just because your university’s logo is on a credit card doesn’t mean it’s offering the best deal. Avoid cards that:
- Offer an “introductory rate as low as” some low percentage. This phrasing masks the fact that the card company can jack up the rate any time it wants to, for any reason. These credit cards reel you in with a low rate that can jump after a few months to 20% or more.
- Charge upfront and annual fees. These can be huge with some vendors.
- Don’t report to all three credit rating bureaus: Equifax, Experian and Transunion. If they don’t, you won’t be building your credit.
Student credit cards can be dangerous for both traditional and online students. But they can work to your advantage, if you’re careful.
Do your own research
There are several sites that will help you figure out where the best deals are in terms of credit cards. Check out MSN Money (moneycentral.msn.com) or Cardratings.com (www.cardratings.com/) to start with.
Don’t let the frills fool you
Many credit cards offer low introductory rates, rewards programs, frequent flier miles, and even free gas when you use your card. These cards aren’t always worth it—they use perks to draw you into higher rates and fees. In addition, the amount you’ll spend on a student credit card probably won’t be enough to get a lot of those perks.
Carry only one card at a time
Your credit rating could go down if you frequently open and close credit card accounts, even if you don’t carry balances on most of them. Don’t open credit cards at stores to get a one-time discount on purchases, then close the accounts soon after—this can damage your credit. Instead, apply for one card at a time, and let as much as a year go by before applying to another one.
Get familiar with the fine print
Know exactly what happens when you go over your limit or pay late, as well as your rates for balance transfers and cash advances. Know your credit limit—first-time student cards generally have low credit limits such as $500 or $1,000. Know when your statement period closes, so you’ll know when you have get your payments in every month—it may not be the first of the month.
Never charge more than you can pay
Your first card isn’t there to give you access to more cash. It’s there to help you build your credit, and learn more about managing your personal finances. Charge small purchases to it, but never charge more than about a third of your limit—and never charge more than you can pay back that month. This way, you’ll live within your means and avoid accumulating more debt than you can manage.
Avoid cash advances
Getting a cash advance is never a good idea—if you need cash, get a job. Cash advances often come with hefty fees, much higher than your interest rate. If you regularly take advantage of cash advances, you’ll accumulate debt much faster than usual and could be in serious debt later.
Student credit cards can be dangerous for both traditional and online students. But they can work to your advantage, if you’re careful. Follow this advice, spend wisely and always pay your credit card bill at the end of the month, and you should be able to build your credit without increasing the amount of debt you’ll have to deal with after graduation.
CreditCards.com discusses student credit cards - Youtube.com
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