Make the Right Moves with your First Credit Card

Young people can get off to a great financial start by making the right choices with their ‘plastic’

By Stephen Mazeika

With most college educations, many students experience things for the first time. Besides all of the social activities and academic challenges, many young people tend to take their first plunge into the world of credit cards.

In fact, two out of every three college students own at least one credit card, according to a study done by the U.S. Public Interest Research Group. It has been a huge emerging market for companies and universities alike, as most colleges now bank around $1billion annually selling students’ financial information to credit card marketers. Some people believe that students are naively walking into a trap set by these institutions that could have dire financial consequences, but there are ways to avoid early card troubles and keep your future looking brighter than ever.

First Card a Disaster for Many

A piece of advice for students; you may envy your friend who always seems to be buying drinks for everyone at the bar, sporting the latest high-end fashions, or toting flashy electronic gadgets in their dorm or apartment, but things are not always as they seem. For many first-time card holders, the sky seems the limit with purchases when in fact, the opposite is usually the case. Typical first-time credit card holders are usually subject to higher interest rates, fees, and accumulate more debt than people of other ages and credit histories. Don’t let this happen to you.

Use Wisely and Reap the Benefits

It’s always easier said than done in terms of spending money wisely, especially when using credit cards. However, there are many incentives to putting some of these tips into practice that will help many first-time card holders both during their time in school and beyond graduation. If properly used, cards have some significant benefits such as:

• Lower auto loan rates and mortgages post-graduation

• Ease in securing apartments as many landlords perform credit checks

• Reduction in insurance premiums as many insurance companies use credit information to set their rates

5 Simple Ways to Help Students Manage their Plastic

1. Apply for card that fits you

Do your own research, and don’t always fall for University sponsored cards as they are not always deals that look out for students’ best interest. Look for cards that have no application, upfront, or annual fess, reasonable interest rates (typically between 14-17% for most students), and make sure the company reports to all 3 credit bureaus (Equifax, Experian and TransUnion).

2. Read the paperwork

When applying for credit cards, make sure you read the booklet of information that they often send. It may be tedious, but it’s worth it to find answers to the right questions, such as:

What are the interest rates and fees?

What’s the credit limit?

When does the statement period close/when are payments due?

What’s the card’s toll free number?

3. Respect your card

Credit cards are not a force to be reckoned with. They can ruin your life, literally, if not handled responsibly. Avoid frequent cash advances and ATM withdrawals with credit cards as high interest rates apply. Also, try to keep as much distance as possible from reaching your limit, as normally breaching around 80% of your max will have adverse affects.

4. Always try to pay your balance in full

If you must remember one thing, heed this advice. If you only pay the minimum, debt will begin to pile up and could take years to pay off. Avoid this practice at all costs, as it will also cause rate hikes and hurt your credit score. By paying your bill in full you will have better chance at future rate adjustments, securing loans, and increasing your credit history. This is a positive contributor to any possible future situation.

5. The internet is your friend

Set up online access to your accounts and sign up for alerts through the company website. This helps you keep track of your balances, and also will provide students with an extra reminder when payments are due or when they are close to reaching a certain amount charged on their cards. Also, automatic payments can make bill paying much easier and hassle free, especially for busy college students.