Things to Consider When Applying
Credit card providers want to offer college students
credit cards. In fact, between email, snail mail and
on-campus promotions, the average college student receives
15 credit card
solicitations per week. That makes it very easy to just
say “why not” especially when you’re tight on cash.
Before you sign on the dotted line, however, there are some things you should consider as you shop for the right card, and remember, you should “shop” for the right card—the company that happened to send you an offer isn’t necessarily the best option for you. Take the time to do the research and find a good fit.
Here’s a no-fail, 3-step guide to finding the right card for you:
1. Define your needs and recognize your limits
Think about your financial situation. Ask yourself some key
questions: What will I use my card for? Will I pay off the
balance every month? When and where will I use my card? What
is going to be the most important feature to me as I
research my card? If you are using this as an opportunity to
build a good credit history and plan to pay off the balance
every month, then you might focus on the rewards and
discounts because interest rates won’t be as much of a
factor. If you know that you will likely carry a balance on the card, then searching for the best APR could save you money in the long run.
As you think about getting your card, consider what the appropriate credit limit is for you, including any fees or finance charges. The credit limit is the maximum total outstanding balance you can have on your credit card account. When you receive a new credit card, you’ll usually have a set limit. If you’ve already defined how much credit you need/want, you may be less tempted to sign up for more credit than you need just because the lender offers it to you. When you consider that over 50% of college students charge their cards to the limit, you can see the importance of putting a cap on how far you can put yourself in debt. Your limit should be high enough to meet your needs, but low enough to keep you out of trouble.
2. Compare the features
Download
a spreadsheet that you can use as you do your comparison
shopping. It includes all of the features below. Think of
other items that might be important to you and add those to
the spreadsheet as well.
Student Credit Cards - Does the company offer a card designed with students in mind? Many student credit cards have features and benefits like special APRs and fairly low credit limits that will help you build a strong credit history.
Annual Fees - The annual cost of membership to a particular credit card account. Most banks now have a selection of cards without annual fees. Do you have to pay a yearly fee for the privilege of using this credit card? You can find a good credit card without an annual fee, but you may have to give up other features.
Annual Percentage Rate - This shows how much credit will cost you on a yearly basis. Is the deal you’re getting what’s called a “teaser rate” that will increase in 6 months or is it the real, ongoing rate? And if you miss or are late with a payment, will your APR, your interest rate, increase and by how much? Is the rate fixed or variable? Fixed APRs do not automatically fluctuate based on changes in an index such as Prime Rate or LIBOR. A “fixed APR” does not mean that the rate is guaranteed not to change, though. Variable rate cards (expressed in yearly terms) however do fluctuate on an index such as Prime Rate or LIBOR.
Introductory or Promotional Rates - A temporary, usually low, interest rate offered by credit card providers to “introduce” you to their services. It usually expires after a certain amount of time and may often be terminated based on how you manage your card. If you make a late payment or exceed your credit limit, your introductory rate might be terminated. Always review your offer details before signing on the dotted line.
Grace Period - The period of time the issuer doesn’t charge interest on purchases. Be sure to read the fine print; some credit card issuers give a grace period only when the account is paid in full. When does interest start to accrue after you have made a purchase?
Fees & Penalties - How much will you pay for late fees, or fees for balance transfers and cash advances?
Rewards & Discounts - Does the card offer special incentives like the opportunity to build up frequent flyer miles, earn free merchandise or get cash-back? Do cardholders get discounts that would pay off for you?
Special Offers - Is the lender offering any special rates or bonus rewards? Are their special offers just for students that you can take advantage of?
Acceptance - Can you use the card anywhere? You can find the best credit card deal in the world, but if you can’t use it when and where you want to, all of the other features won’t really mean much.
3. Read the Terms and Conditions
Before you sign that application, make sure that you've read all the terms and conditions closely. If you don't take the time to read them now, you may get hit with unexpected fees or APR increases later.
» 