If you are student who has just learned how to drive a car or is headed off to college, most of you may not have been given access to your parents' credit cards. But college student credit cards may provide a solution for young people in need of credit anyway because building good credit with student credit cards may be more beneficial in the long run than borrowing your parent’s credit card. Believe it or not, getting a new student credit card in your name is relatively easy - even if you have minimal income, no co-signer and no credit history. To get your own student credit card, just follow these simple guidelines.
Get A Job
If you don't already, consider part-time work around campus on in your neighborhood. It can be for only a few hours a week on campus. If you're going to have your own student credit card, you'll need to make payments on a monthly basis. Having your own checking and savings account at a local bank or credit union is also a good idea. Most banks have special student accounts that require a very little deposit to open. Establishing a history at the bank and accumulating some savings, will give you more opportunities for credit in the future.
Surf the Net
As a college student, you probably have been bombarded with offers for student credit cards. Maybe you've opened your mail to find a fake credit card inside with your name on it. Or, you've seen those annoying credit card applications that always fall out of your new textbooks. You may have also seen credit card representatives with booths set up on your campus giving away free t-shirts and hats to those who complete an application. Don't take the first offer you get, shop around for the best value. The Internet is one of the best places to comparison shop for credit cards.
Read the Fine Print
Beware! Not all student credit cards are alike. Some may have really cool designs that you can pick, such as college logos, sports teams or graphics that act as an extension of your personality. But as the saying goes, "don't judge a book by its cover." Although all college student credit cards provide you with cash in the form of plastic, they can vary greatly by a number of factors: credit line offered, annual percentage rates (APR), annual fees, late fees, cash advance fees, over-limit fees and special perks. APRs can vary from 0% to 29%; annual fees $0 - $50; late and over-limit fees can be as much as $30/month, each. Before you sign on the dotted line, carefully read the terms and conditions of the student credit card, especially the fine print. Pick the card that offers you the lowest APR and fees.
Use It (Wisely) Or Lose It
Many Americans, including college kids, are in debt over the heads. Before getting your student credit card, be sure to understand everything about credit. Credit cards make it easy, and tempting, to go on a spending spree. But spend more on your college student credit cards than you make you'll quickly find yourself drowning in debt. High interest rates, late fees and over-the-limit fees can cause your monthly balance to get way out of control. If you can't pay your bills, your credit history will be destroyed. Bad credit can keep you from getting student loans, buying a car, purchasing a home... even getting your dream job.
Once you have a job, a bank account, savings and an understanding of what credit is all about, you are ready for your first student credit card! If you've done your homework, then you can be confident that you will select the college student credit cards that will help you to establish your credit. Spend wisely and reap the benefits of a good credit history.
College student credit cards have replaced student loans as a freshman’s first experience with student credit. At the sophomore level, out of a sample of 100 students, over 90 are found to hold at least one college credit card. The question is – why do many students find themselves in a vicious cycle of debt with their college credit cards? Why are they astonished with the huge bills they receive each month? Most importantly – must it necessarily always be this way for a college credit card user or is there a simpler way?
There are plenty of statistical indicators to suggest that students run up credit bills regularly yet they do not pay down their card balances nearly enough. Approximately 21% of college credit card users have balances between $3,000 and $7,000. The number of credit cards in an average student’s possession keeps increasing – a sign that they might be acquiring new cards to pay off balances on old ones. But this only leads inevitably to their overall credit balance increasing even faster, adding more debt to a seemingly never-ending downward spiral of debt.
Five Steps to Avoid the College Credit Card Debt Trap
The core reason of this pathetic plight is the absence of a disciplined and planned system of spending. If you, as a student, wish to optimize the use of your college student credit cards, use the following guidelines to plan your spending:
- Pay your bills on time. Late fees are the most unnecessary source of additional credit expense. Always ensure that at a minimum, you always meet the minimum payment on your bill. Ideally, you should try to pay more than the minimum amount to reduce overall charges.
- Use the 20/10 rule. Be careful that you never, ever borrow more than 20% of your annual net income and never spend more than 10% of your monthly income on your monthly payments. In other words, balance your credit budget to avoid irregularities in monthly payments.
- Plan your credit expenditures. With college credit cards at your disposal, it is easy to give in to the temptation of impulse purchases. This can lead to ever increasing credit card balances
over a long period. It is ALWAYS better to plan purchases using your college credit card so you can ensure you only make purchases that you know you can easily pay off.
- Avoid cash advances. The finance charges for these are generally much higher than standard credit purchases and can be very expensie.
- Avoid approaching your credit limit. There may be extenuating circumstances that will require you to incur unplanned expenses, but if you stay well within your credit limit by avoiding unnecessary charges, you can enjoy the satisfaction of knowing that you can comfortably use your card when you really need it.
The Boon or Bane of College Credit Cards
If the guidelines outlined above are kept in mind, you will find that you can live comfortably with college student credit cards. These tips are especially useful for those who envision needing an extra job in order to pay your off credit card bills. Ideally, a balanced credit budget and a zero card balance is the best way to handle your credit card expenses. So, while college credit cards can be extremely helpful to certain individuals, they can also prove to be a huge detriment to those who do not budget and plan to use them accordingly.
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1. Interest Backdating
Most card issuers charge interest from the day a charge is posted to your
account if you don¹t pay in full monthly. But, some charge interest from the
date of purchase, days before they have even paid the store on your behalf!
REMEDY: Find another card issuer, or always pay your bill in full by the
due date.
2. Two-Cycle Billing
Issuers which use this method of calculating interest, charge two months worth
of interest for the first month you failed to pay off your total balance in
full. This issue arises only when you switch from paying in full to carrying a
balance from month to month.
REMEDY: Switch issuers or always pay your balance in full.
3. The Right To Setoff
If you have money on deposit at a bank, and also have your credit card there,
you may have signed an agreement when you opened the deposit account which
permits the bank to take those funds if you become delinquent on your credit
card.
REMEDY: Bank at separate institutions, or avoid delinquencies.
4. Fees Are Negotiable
You may be paying up to $50 a year or more as an annual fee on your credit card.
You may also be subject to finance charges of over 18%.
REMEDY: If you are a good customer, the bank may be willing to drop the
annual fee, and reduce the interest rate ‹ you only have to ask! Otherwise, you
can switch issuers to a lower- priced card.
5. Interest Rate Hikes Are Retroactive
If you sign up for a credit card with a low "teaser" rate, such as 7.9%, when
the low rate period expires, your existing balance will likely be subject to the
regular and substantially higher interest rate.
REMEDY: Pay in full before the rate increase or close the account.
6. Shortened Due Dates
Most card issuers offer a 25 day grace period in which to pay for new purchases
without incurring finance charges. Some banks have shortened the grace period to
20 days‹but only for customers who pay in full monthly.
REMEDY: Ask to go back to 25 days.
SOURCE: MASSACHUSETTS EXECUTIVE
OFFICE OF CONSUMER AFFAIRS AND BUSINESS REGULATION
