College students and credit cards: What YOU don’t know can hurt YOU
Before you even settle into your dorm room, chances are, credit card marketing teams will be on campus to sign up you up for credit cards. In fact, company representatives will compete for your business by handing out T-shirts, coffee mugs, CDs, and other enticements. Your best defense against this marketing blitz is to learn about the importance of using credit wisely.
If you think you can resist the temptation of a credit card, think again. A student age 18 or older, with no income, can get a credit card without a parent’s signature—and more than a handful do. According to Business Week, in 2000, 95% of all college students had credit cards.
Used responsibly, credit cards can be helpful in an emergency and for establishing a credit history. But you should talk to your parents about whether the card will be used for routine purchases or emergencies only and who will be responsible for paying the bill. Here are some tips.
Be aware of teaser rates. Credit card companies sometimes offer low introductory rates to attract new customers. These rates typically last for only a few months and then jump as high as 20%. Carefully compare offers from several different issuers before selecting a card.
Stick with one credit card. There is no reason you need more than one card. It’s easier to manage paying one bill at the end of the month, and using one credit card to pay off another is a dangerous practice that should be avoided.
Pay in full every month. It’s a good idea to get in the habit of paying the balance in full each month. You should avoid charging more than you can pay off at the end of the month.
Pay on time. Be sure to send the credit card payment several days in advance of the due date to allow for mailing time. Late penalties are costly and some companies will increase the interest rate after one or two payments are overdue.
Avoid cash advances. The interest rate on cash advances can be much higher than the rates charged on purchases.
Protect your credit history. As soon as you start using a card, the payments — whether paid on time, late or not at all — become part of your credit history. A poor credit history can affect your ability to rent an apartment, get a job, or buy a car or house. What’s more — the mark stays on a cardholder’s credit record even if the bill is paid later.
Don’t exceed the credit limit. This helps you avoid penalties and ensures that you will have credit available in the event of a true emergency. A $2,000 credit limit doesn’t mean you can afford to carry a $2,000 balance.
Review statements carefully. Immediately inform the credit card company of any discrepancies or errors on the monthly statement.
Report a lost or stolen card immediately. Keep a copy of your credit card account number and the financial institution’s name and customer service telephone number in a convenient place. It is important to call the credit card company immediately if the card is lost or stolen.
Protect personal information. You should never give out your credit card number unless making a telephone, mail order, or online purchase. Do not let anyone else use your credit card and do not charge purchases for other people.