New College Students And Credit Cards Article

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New College Students and Credit Cards

As a new college student, you'll be bombarded with credit card offers. Make sure you get the right credit card for your needs.

Author: Matt Stabler

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If you are about to begin college, you'll find yourself bombarded with opportunities to apply for as many credit cards as you can handle. You'll be offered t-shirts, visors, sun glasses; I even got a portable massager once. The problem is, you'll probably be offered more than you can handle. Just as the tobacco companies prey on the young, credit card companies view young college students as the best investment they can make, for themselves, not for you.

Now don't get me wrong, credit cards are not the ultimate financial evil. Used correctly, they can be a great asset. You just need to limit how many cards you get, and how you use them. Just as importantly, you should get a card that fits your needs. If you are going to use a credit card, you might as well get the most out of it that you can.

Rewards cards are best for this. For example, if you are going to school far away from home, and will be flying back and forth, you may want to get a rewards credit card that offers sky miles, or adds to your current frequent flier miles. If you are going to school closer to home, or commuting, you'll probably want to consider a gas rewards card. Other rewards credit cards that are issued these days are hotel rewards, retail rewards, travel rewards, or even cold hard cash.

Don't just jump at a rewards credit card just because of the reward it offers, you'll also want to look at interest rates, fees, penalties, and all the fine print. Rather than rewards, you may want to reward yourself with an introductory 0% interest rate, these are usually interest free for the first six months. Just make sure you can still handle the payment once the interest kicks in. All to often I come across people who maxed their cards out during the interest free period, and were unable to keep up the minimum payment once the interest free period was over. Keep in mind too that 30% of your credit score is based on how much you owe, and 35% is based on how you pay your debts, i.e., on time, 30, 60, 90, and 120 days late.

Many companies offering credit are also looking at your debt to credit limit ratio so it's very important to refrain from maxing out your credit cards. They look at it like this: Let's say I have three credit cards each with a $5,000 limit. On the first card I have $1,000 charged to the card, on the second I have $3,000, and on the third, I have $1,500. Should something happen to my source of income, I still have access to $9,500 to carry me through a rough time. Now lets say I only have one card with a $1,000 limit and $500 charged to the card. Even though my debt to income ratio is great, if something happens to my income, I only have $500 to help me out, so the credit card will probably get maxed out, and the payment not made. The credit card companies can preach all day that a good debt to credit limit ratio shows responsibility, but they couldn't care less whether or not you are responsible in the use of your cards, just as long as you continue to make payments to them.

A great place to compare different credit cards is Credit4Every1. If you have any questions regarding credit, feel free to drop me a line at mattstabler@credit4every1.net.

About Author

Matt Stabler is a Certified Personal Finance Counselor as well as a Certified Debt Arbitrator. He is the owner of Credit4Every1, as well as working in management for Fidelity Reserves Corp.
http://www.credit4every1.net
mattstabler@credit4every1.net

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New College Students and Credit Cards