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84 Percent of college students have at least one credit card; this is up from 50% just 10 years ago. Half of college students have at least 4 credit cards and the average college student has 4.6 cards. No longer is the question: “Do you have a credit card,” now the question for college students is: “Which cards do you have and how many?”
A thirty year old with bills to pay and several other monthly reoccurring expenses [Gas, Groceries…] does not need more than 4 credit cards, but college students feel as if they need upwards of 4 cards? As a college student I know how easy it is to buy things that I do not need and that I do not have the money to pay for. Late night fast food trips, trips to Wal-Mart to buy 100 dollars’ worth of items I do not need, spending money to impress girls or other friends… If you do not understand the ramifications of racking up large credit card debts you should not own a credit card. It is very easy to put yourself in a bad situation by owning a credit card and racking up a large balance before you graduate.
One important thing to remember is that credit card companies do not give out their best deals to 18-23 year old students. Kids this age either have no credit or a very short credit history and although credit card companies love to reel in customers at a young age like companies in many other industries they do not have to be very competitive with APR or fee’s. Instead of paying an average APR of 14.5% you can expect to pay 18-20% if you are a college student. This means you have to be even more determined to pay off your balance early, before interest can accumulate. As long as you pay off your balance within the grace period of your credit cards you effectively borrow money interest free. Also look for cards that have little to no fees, you want to avoid cards with annual fees but there are a ton of other newer fees credit card companies have been hiding in their fine print lately!
If you are determined to own a credit card as a college student here are three general ground rules:
1. Do not own more than one card. You simply do not need more than one credit card as a college student. Get an all-purpose card and you will be set. The more cards you have the more you will have to keep up with and the better the chance of you loosing track of a card or its balance. Multiple credit cards mean trouble as a college student!
2. Pay off your balance as soon as you get your monthly statement. At 20% APR you can end up paying a lot of money in interest over time to credit card companies if you are not proactive about knocking down your balance each month. The sooner you pay your balance the better your credit score will be as well, it would be great for your financial future if you left college with a credit score above 700, that would put you in good shape as far as mortgages, auto loans, and job applications goes! Employers do look at your credit score!
3. Do not buy anything with money that you do not have. This goes along with what I said in ground rule #2. If you do not have the money to pay off what you are going to purchase immediately do not buy whatever it is you are thinking about buying. It is very easy to get yourself in trouble financially in college; you have to be smarter and more disciplined than the average student.
My favorite credit card for college students is the Discover student card. This is a great card for college students for several reasons. The first reason is obvious, it is targeted towards college students so you do not have to have a lengthy credit history or a high credit score to actually get accepted and get a real card. Cards that are geared towards students might not offer the best rates or fees but you will not have to worry about applying for the card and not getting accepted. Another reason why I like the Discover student card is that it has no annual fee. In addition the card has an introductory 9 month window where you will pay no interest on any of your purchases. After the introductory rate your APR will vary depending on multiple factors but you could pay as little as 14% APR. The cherry on the top here, what truly separates this card from other college credit cards is that you get 1% cash back on all purchases with no limit! This could really add up over time.