Student Credit Cards and You: Choosing the Right Offer
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by: barrywaters
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Now that you have started college, credit card companies are going to chase you with an ardor you only wish you could see from your fellow students. 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 make sure that doesnt happen.
The first tip is not to let the big, bright "0 percent interest rate" on the front of the brochure fool you. That is the introductory rate. After a short period, usually just six months, it ends, and now you have to pay the credit cards real interest rate. The interest rate on credit cards pitched to students are generally higher than standard cards, and currently are about 13 to 21 percent. Student credit cards also come with high default rates that rocket up to 25 to 31 percent if you break any of the terms of your credit card, including something as slight as paying your bill 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. When your interest compounds, you might end up paying two or three times the original cost of an item.
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 rates you will pay after the introductory period ends. Compare all of your student credit card offers, ignoring the introductory rates and all the frills and cash back offers; the only important considerations are the standard purchase APR and the standard cash advance APR.
Once you have narrowed the selection down to a few cards with the lowest regular interest rates, search the fine print for gotchas like high default interest rates and annual fees, and eliminate any cards that have them. Now that you have a few good offers with low regular interest rates and no hidden drawbacks, you can sift through the rewards packages and choose the student credit card that offers the best frills as well as the best core terms. Have fun with your new credit card and start laying the groundwork for your future credit... on your terms.
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