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A little of both, but it's up to you. Make informed decisions about credit cards and how to use them wisely.
Are you ready for a credit card? You may already have a credit card, but if you don't, there will be many opportunities to get one on campus. Many credit companies set up tables in the common areas of college campuses to encourage students to sign up for their card. They might give you freebies such as T-shirts, water bottles, coffee mugs, etc. if you fill out an application. Sound easy? It is, but think twice before you do it. Unfortunately, many of the credit cards offered on campus may not be a good value. According to a study by the U.S. Public Interest Research Group (PIRG), students who get credit cards at campus tables have higher unpaid balances than those who do not. Carrying high, unpaid balances is one of the quickest ways to incur too much debt and fall behind in payments. Why credit card companies target students Students are a surprisingly good credit risk, despite the fact that they have student loans and often do not have jobs . Research shows that students are valuable customers because they tend to stay loyal to their first card, continuing to make purchases with it for many years to come. Advantages of credit cardsLike having student loans, using credit cards can help you build a positive credit history. This can enhance your ability to get a private student loan, buy a car, rent an apartment, get a job and, eventually, buy a house. Other advantages to having a credit card include: - Security in emergencies;
- Reduced need to carry cash or checks; and
- Enhanced personal responsibility and independence.
Only one national card, like a VISA or a MasterCard, is needed to get these benefits. How credit cards are billed Unlike repayment on a traditional loan, such as a student or car loan, credit cards do not schedule your payments over a fixed period. Instead, you are required to make a minimum monthly payment: the smallest amount you can pay and still meet your cardholder agreement (the terms you agree to when signing up for the card). The minimum payment is usually 2% of your outstanding balance. If you pay only the minimum each month (instead of paying off your entire balance), your debt will continue to grow. Many credit card companies also charge late fees (usually 2% of the outstanding balance) and higher interest rates on cash advances. So, are you ready for a credit card?You will have to decide for yourself if you can handle the responsibility of a credit card. They are easy to get but not so easy to manage, especially if you end up with a high, unpaid balance on which interest is accruing, but payments are not being made. According to the PIRG study, of the 79% of surveyed students who use credit cards for multiple purposes, only 13% reported limiting credit card use to emergencies. When making your decision about a credit card, ask yourself: - Do I need a credit card?
- Can I afford a credit card?
- Will I be able to pay off my balance each month?
If you decide to apply for a credit card, be a smart consumer and shop around. Look for a company that offers the following: - Low interest rates or finance charges (combined, they are called APR)
- Low or no annual fees
- A grace period (time when no payments are due) before finance charges are posted
- Other benefits such as purchase warranties, free gas, airline miles, etc.
Money-saving credit card tips Credit cards can be helpful in emergencies or if you are able to pay off the balance each month, but be wary! Credit cards can also get you into trouble. Here are some money-saving hints on using credit cards: Make your card cheaper for you - Avoid carrying balances. Some cards charge 20% or more in interest. (Interest is usually called "finance charges" on your statements.)
- Fixed rates aren't always fixed! A credit card company can change the rate by informing you 15 days before.
- Read your statement carefully and call the company right away if you have any questions.
- There is usually a large finance charge for cash advances. Interest begins accruing when you take the money out, not after the next statement closing.
- Be aware of annual fees. Many times you are charged $50 or more per year just to have the card.
- Watch out for introductory offers! When you see a credit card offer with a low rate, it may expire in three or six months. Note when and by how much the rate increases after the introductory offer expires. You may not remember when it expires, but the card company will.
- Think about your purchases. If you can't afford something now, chances are you won't be able to afford it in a month when the credit card bill comes in! (And if you can't pay in full then, interest will start to accrue.)
If you get behind - Cut your recreational expenses.
- Call your credit card company. They may be willing to work out a repayment plan with you.
- Develop a budget and stick to it! Everyone makes mistakes, but credit problems will follow you and hurt your eligibility for mortgages and loans down the road.
- Look into credit counseling services. Many offer programs or counseling sessions to help you get back on track.
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