First Credit Card? Five Key Tips for College Students

By Rivero, Justine | The Christian Science Monitor, August 27, 2011 | Go to article overview

First Credit Card? Five Key Tips for College Students


Rivero, Justine, The Christian Science Monitor


If getting a credit card is a rite of passage for college students, choosing the right plastic and learning how to use it responsibly is a matter of life and debt. Young people age 18 to 24, carry an average credit card debt of $2,002, according to CreditKarma.com. Before you end up as a debt statistic, learn to pick the right card and manage your credit before getting your hands on plastic. Here are five things every new credit cardholder should know:

If getting a credit card is a rite of passage for college students, choosing the right plastic and learning how to use it responsibly is a matter of life and debt. Young people age 18 to 24, carry an average credit card debt of $2,002, according to CreditKarma.com. Before you end up as a debt statistic, learn to pick the right card and manage your credit before getting your hands on plastic. Here are five things every new credit cardholder should know:

#5 Shop selectively

Think of your credit score as a compass to steer you toward which credit cards you are most likely to be approved for. You can check your credit scores for free at Creditkarma.com and other sites. But if you're scouting for your first credit card, chances are your credit score is low. You have two options:

1. Student credit cards: Designed just for college students, student credit cards help new cardholders build credit and throw in some perks like cash-back bonuses. Some cards even offer credit- building incentives, like the Journey Student Rewards Card from Capital One, which gives a 25 percent bonus on cash back for paying your bill on time. Just keep an eye out for high interest rates and annual fees.

2. Secured cards: Secured cards are great for consumers with poor credit because they guarantee approval. But they require a security deposit of at least $200. Also, nearly all secured cards have an annual fee and additional application fees. If you have limited options, this is your first step to building credit. Just make sure your card, such as the popular Orchard Bank MasterCard, reports your activity to all three major credit bureaus so you can build your credit history.

#4 Know your card's three key terms

Credit card issuers are required to provide a simple, straightforward summary of the card's terms and conditions in plain language, and it's crucial you read them before you apply. Focus on these three key terms:

1. APR: Your annual percentage rate tells you how much you'll be charged in interest for carrying your balance month-to-month. Right now, 14 to 16 percent is the average interest rate. Look for a low interest rate to minimize the cost of your debt.

2. Fees: The big one to dodge is annual fees. Some student cards and most secured cards have an annual fee, so hunt for a card with a low fee or none at all. Watch out for secured cards' additional application or processing fees. Also check the balance transfer fees, cash advance fees, and late fees. While you may not incur any of these fees, it's good to know the cost of these actions.

3. Rewards: This is the fun part about having a credit card! If your card comes with a cash back or rewards program, find out how it works. For example, if your card offers $100 bonus cash back for new cardholders, understand the eligibility requirements. …

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