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What to do With Your First Credit Card

First Credit CardCollege and money troubles go hand-in-hand with each other. College puts a great quantity of stress on a student’s wallet. College debt, eating out, and activities on the weekend can all add up. When faced with so many expenses, some students choose to resort to a credit card. Others get a credit card because they are trying to build up a good credit score before they get out of school. But whether they’re feeling the burn in their wallets or planning for the future, college may be a time when students apply for and receive their first credit card. According to a 2004 study published by MSN.com and conducted by Sallie Mae, a student loan corporation, the amount of undergraduates with credit cards has risen to 76 percent. The results also reported that in 2009, the percent had risen to 84.

At first, many people look beyond the risks of a credit card and go straight for the rewards, but being reckless with a new credit card can cause long term problems. Debt can begin to rack up and a bad credit score doesn’t disappear overnight. Dr. Robert H. Scott, Associate Professor of Economics, calculated that if students racked up $1,000 in credit card debt and with 18 percent interest, with only paying the minimum on the debt, it would take 12 years and nine months to completely pay it off. According to Scott, you would have ended up paying $1,115 just in interest.

But to avoid these downfalls, there are many precautions students should take before and after receiving a credit card.

Before you get a credit card, there is some fine print that you need to watch out for. Students should pay specific attention to the interest rate and annual fees. The optimal card has a low interest rate and no annual fees.

Some cards even offer zero percent interest rates, but they can be misleading. An article on Creditcards.com, titled “Seven Tips for Handling Your First Credit Card,” says that some credit card companies offer a zero percent interest rate; however, it is often only the introductory rate, meaning that after a certain amount of time, the rate will increase. Scott adds, “Even if a card advertises low rates, as soon as you fail to pay off the total balance the rates will increase immediately.”

In regards to the annual fee, there are multiple cards that offer this perk and it is best to take advantage of it. The annual fee on a card is simply known as the fee a card company charges you for using their card.

Overall, Scott recommends getting a card that is widely accepted and offers good rewards.

After you have scoured through all of the different types of cards and have discovered the best type for your uses, there are simple things to always do to stay on top of your money and debt. According to the article on Creditcards.com, setting a budget is essential. There should be a certain amount of money that you feel comfortable paying back; this should be based on how much money you earn or how much you have saved.

One of the tips offered in the article on Creditcards.com lists that students should not use the credit card for more than can be paid back. You might be able to defer paying for that sweater you have been eyeing, but soon it will catch up to you.

Another important rule for students to follow when using a credit card is to pay their bill on time and in full. This eliminates any chance of a late payment or acquiring debt. Scott adds that both situations can hurt your credit score, and/or retailers can decline your card for purchases.

“If you get a credit card, start out by charging very little with it until you get comfortable paying it off every month” says Scott, “Using online banking to manage credit cards is great”. By going online, students can always keep track of the balance on your card.

Students should also be weary of their card limits. Depending on your credit card distributer, fees can differ. Bankrate.com reports that $29 and $35 are common “over-the-limit fees.” With a small limit, those fees can be a hefty chunk of the bill.

But opposed to the cons, getting a credit card does have its perks. According to sophomore Kati Latina, her credit card was a great help when she came to school. “I am able to purchase necessities even if I am low on money, and so far I have been able to stay up to date with all of my payments.”

Overall, there should be a line between purchasing necessities and spending recklessly. If you make your payments (and on time), you can build up a good credit score. This can help you in the future when buying a house, a car or making the decision to take out a loan. As long as precautions are taken, credit cards can be an advantage to college students.

 PHOTO COURTESY of Jenna Intersimone