Selecting a student credit card must be done carefully for debt protection.
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Across the country, students arriving on college campuses can expect to get bombarded with credit card offers. Some statistics indicate that college students on average get five to seven credit card offers during their first week on campus. Booths on campus may offer t-shirts, food, frisbees and other goodies for signing up for a credit card on the spot. While a free gift may be nice, potential student cardholders can probably get a better deal elsewhere, such as online at CreditCards.com.
With all the offers dangled in front of them as they stroll around campus, students who are easily wooed could end up in trouble. Excessively use of their plastic could leave young people in serious debt. Many coeds may not understand exactly how credit works — with compound interest a foreign language and late fees a subject they’d rather not study. Such cardholders may not even consider the dent that four years of reckless credit spending can put on their future finances. Separately, careless handling of on-campus credit card offers can leave students open to identity theft.
Due to the huge number of credit cards offered to students, many universities are now monitoring credit card recruiting on campus. Still, they have no control over what happens off-site.
In the end, it is up to the students to make smart decisions when choosing a credit card. Experts note that credit cards themselves are not a problem. Rather, trouble often begins with an individual student carrying too many credit cards. Many times parents want their children to have a card in case of emergencies. But that one card is usually enough. According to James Boyle, president of the College Parents of America, students do not need four or five credit cards.
When selecting that ideal credit card, experts encourage college students to pick one that offers a low interest rate after the initial sign-up period. Even if they have not established a credit history, students should be able to qualify for a reasonable interest rate. Although many cards offer introductory rates of 0 percent for the first six to 12 months, experts advise students without a credit history to find a credit card with an annual percentage rate in the midteens, or about 16 percent to 17 percent or below, and to avoid altogether any credit card with an APR over 20 percent. CreditCards.com offers a number of student credit cards with APRs in this ideal range.
Depending on who is making the recommendation, both fixed rate and variable rate credit cards have their advantages. What is perhaps more important is getting a card with a low interest rate, since college kids often carry a balance and a higher APR will end up costing them more.
Those co-eds who have a handle on their expenses and can exercise restraint when using their plastic should consider a rewards credit card which provides incentives that match up with student spending habits. Reward credit cards may grant the cardholder points when charging such student expenses as books, groceries or gas. Therefore, a rewards card may be ideal for a student who has control of his or her finances and pays off their card balance each month.
Additionally, students should realize that there are many card options that do not charge an annual fee and offer a grace period of at least 20 days, which can be key if they do not make their monthly payment on time.
Meanwhile, parents and students should be aware that many credit card issuers are looking to make some easy money off the financially naive, including college students. Certain issuers may hit the cardholder with a number of fees, or worse, promise a tantalizing gift like a computer, but then require the cardholder to keep a balance on their credit card, all the while paying interest. That is why students should always read the fine print associated with a credit card offer before signing up.
Among the credit cards that experts recommend for college kids, the Citi mtvU Platinum Select Visa Card for College Students occupies the top spot on many lists. Experts highlight the fact that the card offers points for students who pay their bill on time, as well as for earning a good GPA.
For those students who just can’t get the hang of responsible credit card use, it may be a better idea to simply not get one. As the College Parents of America’s Boyle states, it is not necessary for young people to build a credit history while in college. He believes that employers are not expecting recent grads to have a credit history, with a college degree in itself helping to establish credit.
And, a bad credit history racked up during the college years can haunt young people when they try to enter the workforce. According to a survey of the Society of Human Resource Management, 35 percent of respondents requested a credit report from new hires. In a work world that is increasingly conscious of security, the resume from an applicant with a bad credit history could get passed over in favor of a hire with a record of financial stability.