Student credit cards

If you have recently graduated from high school and are now enrolled in college you have probably started getting numerous credit applications in the mail. Or if you have started college you have probably walked by thousands of tables that are offering free shirts in exchange for applying for a student credit card. And because we all know how expensive college can get, trying to pay for tuition and books and just trying to live it is actually very tempting to sign up for those student credit cards. But the thing is that if you do not know what you are getting into these student credit cards can actually cause you more misery than they are worth. But if you know what to watch out for and how to use a student credit card having a student credit card can actually be rather helpful in a lot of situations.

So if you are a college student applying for student credit cards here are some tips on how to effectively use your student credit cards and what to watch out for when applying for them.

Number one:

Make sure that you understand that how you use your credit card now is going to affect your financial future because it is going to have an effect on your credit score. One thing that you need to keep in mind is that if you carry a large balance on your credit card and are only making the minimum payments each month you are going to be considered a credit risk by FICO and if you are labeled a credit risk your credit score is going to go down. Once your credit score drops this is going to affect you in numerous ways. One way is that it can affect you buying a car because it can cause you to have higher financing rates, but it can also affect getting car insurance because it can mean higher payments each month.

Number two:

Try not to carry a balance; in fact you should never carry a balance. This isn't always possible but if you can avoid it you should. When you carry a balance from one month to the next you are actually lowering your credit score and increasing the amount of money that you are going to need to pay back in the end. The way that the money increases is because by carrying a balance you are accruing interest charges on your credit card. For those of you who know nothing about credit card interest it is a form of compound interest meaning that the interest just keeps piling up, how this works is that you have your balance plus your interest for that month, then the following month interest is charged on your old balance, which your old balance includes your interest charges from the previous month. So what happens is that the money keeps adding up even if you quit using the credit card.

Number three:

Keep an eye on your interest rate. The reason for this is that the higher your interest rate is the faster your balance is going to increase each month. What you really want to do is to choose a credit card that offers a low interest rate or even a 0% interest rate for as long as possible. But keep in mind that these "teaser" rates are usually going to increase in time so you want to watch out for what those rates are going to become.

Number four:

If you can afford to pay your credit card bill in full each month you should actually look into rewards cards for students. These types of cards can provide cash back, miles, hotel points, or many other bonuses just for using your credit card on a regular basis, so in a way you are getting more than what you are paying for. But if you do decide to go this approach you are going to want to watch out for the annual fees that these types of cards charge because it can actually offset any bonuses that you earn.

Number five:

Many students tend to think that prepaid credit cards are the best answer to their credit card problem, but this isn't always the case. Sure the prepaid cards provide you with the convenience of a credit card without the responsibility, which is nice especially if you have problems paying your credit card bills. But that is about all that they offer prepaid cards are not going to help you build your credit, they are not going to help out in case of an emergency for the most part, and they don't offer you any kind of reward for using them.

Number six:

Rather than taking your credit card with you every time you go out shopping you should also carry cash. By leaving your credit card at home you will not be tempted to splurge on purchases that you really can't afford or items that you really don't need. It has actually been proven through numerous studies that people who pay for items with cash tend to spend less money than if they are paying with a credit card. The reason for this is that the cash is real because you are losing that amount right away whereas with a credit card you don't have to think about it until a month later when you get the bill.

Number seven:

If you think you are paying too much in interest or are having a hard time with your credit card you need to pick up the phone and call your credit card company to see if there is anything that they can do like lower your APR. If you ever have to make a late payment on your student credit card you are going to want to make sure that you call your credit card company ahead of time to get the late payment cleared because this can help to keep your interest rate at the low level, but it can also help you to avoid costly late fees that your credit card company might charge you for being late.

Number eight:

When looking for the best student credit card it is going to pay to shop around. Don't get talked into applying for a card just because they are offering something for free. You want to take your time and look into all aspects of the credit card before you apply for it. You also want to make sure that you read the fine print on each credit card to be sure that you understand the terms and conditions that apply to that card. Many times credit cards put in the fine print the fact that they can substitute a different credit card that is not as attractive as the premium credit card if you don't qualify for the card that you are applying for. This gimmick is one you really want to avoid because it can cost you in high fees and interest rates.

Number nine:

Watch out for credit cards that offer fixed APRs, even though this can sound good because you know your interest rate is not going to change after a set period of time this can be deceiving. These types of credit cards can actually raise their interest rates with as little as 15 days notice to the cardholders. And many times with these types of cards if you have even one late payment or even go over your limit by one dollar your rate can be unfixed and they can raise the rate without notifying you.

Number ten:

When looking at the various credit card offers you are seeing you are going to want to find the one that offers you the longest grace period. The reason for this is that the longer the grace period is the better chance you have of paying off your credit card balance in full so that you don't incur interest charges. It used to be that all the grace periods were for one month but now they are getting shorter and shorter, with the average grace period being 23 days, but some credit cards don't even offer a grace period.

Number eleven:

Hidden transaction fees are another way that credit card companies make extra money and most people fall victim to these types of fees because they don't read the fine print where the hidden transaction fees are buried. Some of the common types of hidden transaction fees that apply to student credit cards are a fee for balance transfers especially on cards that offer low interest rates, or cash advances. But something else that is buried in the fine print is something called minimum fees. These are fees that the credit card company will charge for performing certain transactions just like hidden fees. But in these cases the company can charge you either a certain percentage or a flat fee depending on which is the higher amount for them performing that transaction.