While strolling around a college campus after making the trek to their new educational institution, students can typically expect to encounter several booths touting clubs, student associations, bank accounts, and credit cards.   Sometimes the hook to incentivize new students to apply for a credit card comes in the form of a t-shirt, a gift card, or other immediate rewards.  Despite the free shirt or other stuff, new students should be aware that although college is a great time to start building a credit history, the best credit card offers will likely be found online or by using CreditSense.com to determine the best offers that are available.

 

When college students get their first shiny new credit card, it is important to avoid the pitfalls that can come with the new credit line available to you.  Just like Calculus 101, you have to start with the basics.  First of all, we at CreditSense strongly recommend that you don’t ever buy something with a credit card that you can’t already afford.  With a little discipline to pay off your balance on time every month, you can begin to use your credit cards to earn travel rewards, cash back, or other rewards without it costing you in interest charges and late fees.  When considering student cards, be sure to ask yourself a few questions:

 

1. Am I going to be sure to pay off my balance every month?

If you know you lack the discipline, or have an unavoidable need to carry a balance, then you need to make sure you pay attention to the APR (annual percentage rate) of the cards you’re considering.  Since interest rates can vary from 11.0% to as much as 19.99% this consideration will greatly affect the interest that you’re charged each month.  Going with the card that offers the lowest interest rate will minimize the cost of using your new credit card and will also make paying your balance down much easier and faster since less of your hard earned college student budget will be used for paying interest.

 

2. What benefits do the credit cards you’re considering offer?

Hopefully you’re getting more than a free t-shirt out of your use of a credit card!  You’ll want to peruse the benefits you’ll be getting from your card.  Some great cards like the Citi Forward Student Card offer a ThankYou Points signup bonus and an attractive rewards program and have no annual fee.  Offering the opportunity to earn 5 ThankYou points for every dollar spent on dining, textbooks, books (amazon purchases count), movies and music, makes it one of the best student cards available.

 

3. What are the late fees and when do penalty rates kick in?

Much worse than being late to class, being late on a payment can be super painful with credit cards.  Other than the Citi Simplicity card that waives late fees and penalty rates, just about all credit cards will respond to late payments by first charging you a late fee (as much as $35) and usually will then change your interest rate to the penalty interest rate which will usually be more than 20% and often as high as 27%.   It’s important to know what you’re getting into if you are late in your payments.

 

Use your card’s automatic payment feature to ensure you don’t get into penalty rate trouble.   Those attractive balance transfer offers and their introductory interest rates can quickly vanish after the first late payment, so making sure you’re full balance or at the very least, your minimum payment is automatically transferred from your checking or savings account.