Find The Right Card For You
Credit card companies have a habit of setting up shop on college campuses, especially at the beginning of the school year. They offer water bottles, sweatshirts, key chains and other goodies – like high interest rates and hidden finance charges.
As you’re walking down the corridor, avoid the temptation of the little goodies and think about what is really important in a credit card. You need low interest rates, reasonable fees and good customer service.
When college students graduate, many finish with their diploma and over $3,000 in credit card debt with interest rates averaging 18%. Credit cards are a great way to pay for items you need that you can afford all at once and can help you build a good credit history. However, if not handled responsibly, you could end up over your head in debt and with bad credit. Bad credit can prevent you from qualifying for a home, car or personal loan at a low interest rate – and prevent you from getting a loan at all.
In addition, employers, landlords, insurance providers and other people will pull your credit report to determine these aspects of your life. Employers use your credit report as a way to see your responsibility levels and if you can handle finances. Landlords and insurance agents use it to see if you are likely to pay their dues on time.
As you can see, your credit has an impact on nearly every aspect of your life, in a negative or positive way. You can start off on the right foot and avoid these financial troubles by following a few simple guidelines.
No Annual Fees, Low Interest Rates and Credit Unions
Find a credit card with no annual fees and low interest rates. If the low interest rate is an introductory rate that will expire after a few months, find out how much your interest rate will go to after that period. It could skyrocket to 18% – 20%.
When it comes to annual fees, find out what you are paying for. If the annual fee is for certain perks, like rewards, frequent flyer miles, cash back bonuses or others, think about whether or not you would actual use these perks. Also, decide if the annual fee is worth paying for the additional bonuses. You may find that they are not worth the fee and in that case, move on to another card with no annual fees.
Chances are you won’t find low rates and no annual fees at the credit card booth on campus adorned with balloons and free tee-shirts. You need to look for them. Go to a campus credit union or talk to family that may be a credit union member. Restrictions have lessened on credit union memberships so you may be able to apply at a local credit union. Call or stop in to find out if you can apply for an account and a credit card. This will be your best bet to finding the lowest rates.
Big Names don’t mean Big Savings
According to a Consumer Reports finding, some of the largest credit card issuers have the lowest marks from customers. These companies include JPMorgan Chase, Bank of America, CitiBank and Capital One. Incidentally, these big names are also big players in the student credit card market.
Look online at some credit card comparison websites for more information on credit cards that offer low rates, no annual fees and good customer service ratings. This is what you should be looking for in a credit card. As aforementioned, go to a campus or local credit union to find the best rates. The smaller bank will also be easier to deal with if problems arise and are less likely to surprise you with fees and interest rate hikes.
Read the Fine Print
Before you sign on the dotted line and get your plastic, make sure you read the fine print. Understand the contract and know the terms and conditions. You don’t want to be surprised with a huge hike in interest rates or shocked by additional fees. Know what the penalty is if you are late or miss a payment.
Remember that a credit card contract is legally binding and you are financially responsible for the charges on your credit card account. This can help or hinder you in many ways, so be sure you fully understand every aspect of this contract before you agree to the terms and conditions.
Your Credit Card is not a Cash Card
Do not use your credit card the same way you would use an ATM card. When you charge on your credit card, pay it off within the grace period so you don’t accrue any interest charges. If you can’t paid it in full every month, pay attention to how your debt will be adding up and weather you can, or want to, afford it each month.
Do not use your credit card for everyday purchases. Keep it on your for emergencies and as a last resort, but not to buy dinner at a restaurant or go to a movie. Think about how much these items will cost you once you pile on interest.
Most importantly, avoid cash advances at all costs. This is an absolute last resort. If you have other means to get cash that you need, use it. When you use a cash advance on your credit card, you will be charge up to 20% or 25% interest. Many cards will not allow you to start chipping away at the charges at the higher interest rate until you pay off the balance at the lower interest rate first. In addition, you will typically be charged 3% of the amount you used as a cash advance as a fee. Also, this can put you over your credit limit and cause you more problems with additional fees (usually $39) and hurt your credit score.
It may be difficult, but if you are in a bind, talk to friends or family before you use a cash advance. The fees, penalties and interest will add up quickly and you may get in over your head. This is a stressful way to start off your credit history.
Start off Your Financial Future on the Right Path
If used properly, credit cards can be a great way to build your credit history to help you in the future. Look for low interest rate and no annual fees. Fully understand your contract and ask questions if you need clarification. Always pay your bills on time and never go over your credit limit. Follow these simple steps and you’ll be on your way to a high credit score and a secure financial future.
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State Guides to Credit Card Laws
- North Carolina
- West Virginia