College Credit Cards

Getting a College Credit Card

Many students are greeted on the first day of school by credit card representatives offering free t-shirts and CDs to students who sign up for a card. These college credit cards can be a great deal since they are marketed directly to students who don’t have much of a credit history. Usually the application is quick and easy and a new card will be sent straight to your dorm room.

You can also find a college credit card by searching online. Most major credit card companies have a card specifically designed for young people just starting out.

In some cases, a parent or guardian may need to co-sign before you can be approved for a credit card offer. Parents can also add their children to existing accounts. This can be a good option for parents who want to keep an eye on their kid’s spending.

What to Look For in a College Credit Card

As with most credit card offers, you need to read over all the fine print carefully and make sure the terms of the card are something you can live with. Specifically, find out about the card’s:

• Interest Rate. Many cards offer a low introductory rate to entice you, but may increase to a large rate after the introductory period is over. This might be okay if you need to make a large purchase, like for school books or dorm furniture, and you will pay off the amount before the intro period ends. But if you plan to make regular purchases with the card and end up carrying a balance from month to month, you could pay out a lot of extra money.

• Payment Options. Most cards require that you make a payment each month by a certain date. This can be tricky for college students who don’t have a steady income. If you miss a few payments, you could lower your credit score, making it difficult to get loans and other credit cards. Before accepting a credit card offer, find out what the payment options are, the grace period, and if the company has a forgiveness policy. Some college credit cards offer more flexible payment schedules than other cards.

• Credit Limit. The amount you can charge on a credit card varies widely. This depends mostly on your credit history. Since many college students don’t have much experience with credit, the limit may be relatively low (around $500). This can actually work to your advantage, since it will prevent you from overspending. But if you do get a high limit, you will need to exercise restraint to prevent yourself from getting into debt that you can’t pay off. Remember that just because you get approved for a certain limit doesn’t mean you have to spend all of it. That amount is only going to have to be paid back, with probable interest.

• Cash Options. Students can get in financial trouble quickly if they use their credit cards like an ATM card. Although you may be approved for cash advances, these usually come with a higher interest rate.

Credit Card Habits

While it can be tempting to pull out your college credit card for every purchase or to use it to treat the dorm to pizza, balances can sneak up on you fast. It’s a good idea to stick with just one credit card so you can keep track of how much you owe and where. Keeping balances low or paying them off every month can help guarantee a good credit future.

Establishing and maintaining a good FICO score is the first step to developing a solid financial structure. This score decides a consumer's creditworthiness, and lenders look favorably on those with a reputable FICO score and strong credit history. So get used to maneuvering credit to work to your advantage, not just for immediate satisfaction, but also for the future.