Student Credit Cards and You: Choosing the Right Offer
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by: barrywaters
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Word Count: 505
Now that you are a college student, credit card companies are going to court you with a passion you only wish you could see from prospective boyfriends or girlfriends. As far as the credit card companies are concerned, you are a dream date: young, with an unmarked credit report and (they hope) bound less naivete about credit cards. They want you to take a credit card with an irresistibly low introductory rate, spend madly, and owe them thousands upon thousands of dollars when your interest rate shoots up at the end of the introductory period. Lets disappoint them.
The first tip is to ignore the huge, sparkly "0 percent interest" printed in bright red and gold letters on the front of the brochure. Thats nothing but an introductory rate. After as little as six months, it goes poof, and suddenly everything you charged to the card is accruing interest at the cards real interest rate. Student credit cards typically have somewhat higher rates, currently running from about 13 percent to about 20 percent, with default rates that shoot up to about 25 to 31 percent if you pay a bill even a day late. The new, higher interest rate applies retroactively to all your purchases, so even if you charged an item when your interest rate was zero, at the end of the introductory period you must pay 13 percent (or 19 percent, or 30 percent) until your entire balance is paid off. Once the interest starts compounding, you could pay two or three times as much as the item is worth.
The key to using a credit card well is to pick the card with the lowest regular interest rate you can find, then charge as though the zero percent introductory rate didnt exist and you were paying the regular interest rate. To puzzle out which interest rate is a credit cards real rate, look for the fine print or find the chart that lays out the rates. The standard purchase annual percentage rate (APR) and the standard cash advance APR are what you are looking for. These are the real rates, which will kick in after the introductory period. Compare all the student credit card offers you have received, paying no attention to the introductory rates and all the frequent flyer miles or other frills. The only numbers you care about at this stage are the standard purchase APR and the standard cash advance APR.
Once you have found the credit cards with the lowest regular interest rates, read the rest of the fine print for catches like annual fees and high default interest rates, and use it to narrow your selection. Now that you have a few likely offers with low interest rates and no nasty surprises, you are free to consider rewards packages and pick the student credit card you like best. Have fun with your new credit card and start laying the groundwork for your future credit... on your terms.
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