If you’re a college student, then credit card companies are practically jumping at you to sign up for their cards. With so many numbers, conditions, regulations, and so on…How do you know what to look for when you actually want one?

I was inspired to write an article about this when a good friend told me he had signed up for a credit card. When I asked him simple questions about it, he couldn’t answer them!

Without understanding how a credit card words, one is liable to go into deep deep deep debt. Many people go into debt because they use the money from their credit card irresponsibly. And with credit card companies offering thousands of dollars in credit, it’s very tempting to buy things that you normally can’t afford. So how does one go about getting a credit card without getting screwed over? In this article, I am going to attempt to explain credit cards simply.

Who: Who should get a credit card?
You should get a credit card only if you are responsible with money. Credit card companies make money when you don’t pay off your credit card on time. They will charge you interest, which is the % APR that you see on their offers. Let’s say, for example, your APR is 10%. If in one month you spend $100 with your credit card and you neglect to pay it when it’s due (usually the bill comes in monthly cycles), then the credit card company will charge you 10% –you now owe them $110. A lot of people will accumulate debt this way. Treat your credit company like the Japanese mafia: They will loan all sorts of money so long as you pay it back in time. If not, they will break your (financial) legs.

What: What should you look for?
There are as many different credit cards as there are people. Banks often have their own credit cards. Even retail and online businesses such as eBay and Amazon have their own credit cards. Each one has their own set of “perks” that they try to lure you in with. But here is what you should really look for:
- No annual fee: Any credit card that comes with an annual fee is not worth signing up for. Fortunately, most credit cards nowadays do not have an annual fee.
- Introductory APR: Usually credit card companies will include 0% APR in the first several months after you sign up. This means that they will not charge you any interest. The longer amount of time you have 0% APR, the better. Some companies offer 0% for over a year.
- APR: This is the interest rate the credit card company is going to charge you if you do not pay off your credit card when it’s due. It is almost always liable to change, which is why you should take care in paying your bills on time (unless you have 0% APR, in which you have a little breathing room). There will never be a credit card that always has 0% APR.
- Rewards: These come in many forms: earning “points” that accumulate towards prizes, cashback, travel miles, etc. If you travel or drive a lot, there are cards that offer money or miles towards your airplane tickets or gas. Reward programs that offer points are usually not worth getting because when you calculate how much money you need to spend in order to get that “free” TV, it most likely will not work in your favor. The best reward cards are the ones that offer you a percentage of your purchases back (often called “cashback” rewards or programs). When signing up for a credit card for its rewards, make sure you read all the conditions carefully because there are almost always exceptions.

Where: Where should I get a credit card?
If you’re serious about getting a credit card, then exhaust all possible resources. Look online, find customer reviews, open up those credit card offers in your mail instead of chucking them. Compare and contrast. Make a Venn Diagram! OK, maybe not to that extent, but the more you look at your options, the better you’ll come to understand which ones are better for you than others. Be careful about scams and only get a credit card from companies who you’ve heard of. If you’re interested in a mailed offer, visit the company’s website and make sure they are legit. When you sign up, sometimes the company will try to throw in an extra “service” that sounds like it’s necessary. I signed up for a Chase credit card over the phone and they tried doing this to me. I refused and they asked two more times. This happened again when I called to activate my card! The truth is, if it doesn’t already come as part of your credit card plan, you don’t need it. You shouldn’t have to pay anything for your card.

When: When should I get a credit card?
Again, this depends on how responsible you are with money. Sometimes parents will have their teenager sign up for a credit card to learn how to handle money while establishing credit at the same time. I got my first credit card during college.

Why: Why should I even get a credit card?
If you plan on making a big purchase such as a car or a house–anything that involves a lot of money and requires monthly payments–you will need to show that you have established credit. Used responsibly, a credit card will help you in the long run.

For more information about the ins and outs of credit cards, here are some links I found helpful:
- The Most Common Credit Problems
- 27 Money Tips for College Students
- Eight Things a Credit Card User Should Know

3 Comments »

Perhaps you might be interested in this article as well: Credit Card Tricks and Tactics. These are the many reasons why people get into so much trouble when it comes to credit cards.

Said by L.L. | March 5, 2007 @ 11:38 am

Great article, L.L. Thanks! I always wondered if my statement that comes in 10 days before the bill was due was intentional…

Said by Sarah | March 5, 2007 @ 11:42 am

Thanks! Glad you found it useful.

Said by L.L. | March 6, 2007 @ 5:49 am

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