11 Things College Students Should Know Before Opening a Credit Card

Getting your first credit card is a big step and with the right knowledge you'll be on your way to having great credit and plentiful rewards in no time.

College is a great time for financially responsible students to start learning to use credit cards. Credit cards can enable students to make purchases, build credit and even earn rewards. But credit cards can be a confusing concept for a first-timer.

Here are eleven things all college students should know about their first credit card.

1. It Can Help Build Your Credit …

Credit cards are important credit building tools, as card activity is typically reported to credit bureaus and included on your credit report. Over time, credit cards can help you establish an excellent credit score. Excellent credit can help you secure loans, land better interest rates and even reduce common monthly payments.

2. … If You Use It Correctly

Credit cards only help your credit when they’re used wisely — irresponsible use can severely damage your credit. To successfully build your credit, you’ll need to start and stick to smart credit card practices. These include making payments on time, maintaining a low balance and keeping accounts open over time.

3. It Isn’t Free

The credit limit on your credit card isn’t a budget for your next spending spree. Any purchase you make on your credit card will accrue interest if isn’t paid off in time. Plus, credit cards charge additional fees, which may include annual fees, foreign transaction fees and late payment penalties. Pay close attention to the annual percentage rate (APR) and fees for any credit card you’re considering.

4. Missed Payments Have Consequences

If you miss a payment or make a late payment, your credit card issuer may charge you a late payment fee. You might get slapped with a penalty APR that’s much higher than the interest rate you signed up for. That missed payment could even land on your credit report and bring down your credit score for up to seven years.

5. There Are Options if You Have No Credit

If you have no credit history, you can still qualify for certain types of credit cards. One of the best options is a secured credit card, which requires a security deposit upfront but then works just like a traditional credit card. You could also have a trusted family member add you as an authorized user to their credit card account.

6. You Should Pay More Than the Minimum

While it’s tempting to only pay the bare minimum each month, it’s wise to pay a little more. Minimum payments won’t significantly reduce your balance, and you may wind up paying a lot in interest over time. To completely avoid interest, you should pay off your balance in full each month. This means you shouldn’t charge more than you can afford to pay.

7. Applications Can Harm Your Score

When you apply for a credit card, the ensuing credit check (known as a hard inquiry) may land on your credit report. Hard inquiries can ding your credit score a few points but aren’t damaging in the long term. There is a risk in submitting too many applications over a long period of time, so you should try to limit your credit card shopping to a two-week period.

8. Use Rewards Wisely

Many credit cards earn rewards, such as cash back or travel points, as you spend. These rewards can be extremely valuable, but only if you use your card correctly. For instance, cash back cards are less valuable if you carry a balance month-to-month, as interest will eat into the profitability of your card. The way you redeem rewards also varies from card to card, so you’ll want to pick a card that actually provides rewards you’ll use.

9. Not All Cards Are Created Equal

Some credit cards are specifically designed for college students and offer security features, rewards and programs that benefit the fledgling credit card user. Take a look at student-focused credit cards, as they may be more accessible to you and have student-friendly policies. Some of these cards have certain requirements when it comes to credit scores. Before applying for any new cards, it’s wise to check if you will qualify by reviewing your credit scores. You can check two credit scores for free on Credit.com.

10. It Doesn’t Have to Be Exclusive

Your credit card will help build credit whether or not you use it religiously, so don’t feel obligated to use it for everything. You can keep it in case of emergencies or for the occasional purchase.

11. There Are Security Benefits

Credit cards offer a number of security benefits over cash and debit cards. They aren’t tied to your bank account, and you’ll never be responsible for more than $50 if your credit card is stolen. Plus, credit card companies often offer additional security features and monitor your account for suspicious activity.

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The post 11 Things College Students Should Know Before Opening a Credit Card appeared first on Credit.com.

How to Choose Your First Credit Card

Picking your first credit card can seem overwhelming, but by keeping in mind a few key tips, you'll be able to make the right decision with confidence.

Whether you’re a teenager without credit history or an adult who’s familiar with loans and debit cards, choosing your first credit card can be tough. The prospect of finding a card may seem overwhelming, but with the right knowledge, you’ll be able to choose the right card and begin building your credit. Here are several things to consider when choosing your first credit card.

1. Do Your Research

Be aware of what getting a credit card entails, especially because credit mistakes can negatively affect your life and financial standings for a long time. Whether you’re scouring the Internet, speaking with a credit expert or reading our site, it’s important to learn as much as you can before taking the plunge. Being well-versed in the process of applying for and using credit cards will benefit you in the long run. Don’t skimp on research.

2. Ensure You Have Steady Income

Credit card issuers typically require a verifiable income when someone is looking to apply for their first credit card. After all, being able to repay your balance is the key to getting approved for a credit card. Lenders need to know that you’ll pay them back and that they can trust you. Federal law requires that adults under age 21 have income before they can be approved for a credit card without a cosigner. So if you’re a young adult, consider getting a part-time job so you don’t have to find someone to cosign.

3. Choose Wisely

There are plenty of credit cards to choose from. It can be overwhelming to sort the possibilities. While searching, focus on your main concerns and struggles. Are you worried about paying bills on time? Consider a card with a low annual percentage rate. Aren’t sure you’ll have enough self-control for a credit card? A secured credit card could be a great option. There’s a credit card that works for everyone. Don’t choose a credit card because of a cool design or dreamy rewards without checking all of the details.

4. Read the Fine Print

Before you choose your first credit card, make sure you’ve read the terms and checked the fees, rewards and interest rates. A bad combination of card features could come back to bite you if you aren’t careful when signing up for a card. 

5. Consider a Secured Credit Card

Speaking of secured cards, they’re a great option for your first card for several reasons. (Not sure what a secured card is? This article explains it all.) As long as you pay responsibly, your score goes up, and you can switch to an unsecured, card. Some secured cards give you cash back, or offer no annual fees. Your deposit acts as your credit limit, so if you can only pay a security deposit of $200, you’ll have a $200 limit. Having a lower limit shouldn’t be an issue, though, because you’re just starting out with credit. 

Barry Paperno, a credit expert who writes for Speaking of Credit, says a secured card is the way to go for first-time credit card owners. “You can build a really good credit score with just a secured card,” Paperno said. “Plus, because of the security deposit, you won’t have an unpaid charge-off at the end.”

6. Avoid Cards That Require Excellent Credit

Being denied credit doesn’t affect your credit score, but your score is still affected by lenders looking into your credit history. If you apply for your first credit card and it’s out of reach, you’ll end up stuck in a loop of hard inquiries and rejections. “Most card lenders won’t even give you an unsecured card if you have no history,” Paperno said. If you’re not sure where your credit stands, check out your free credit report snapshot on Credit.com.

7. Use Loans to Your Advantage

Essentially, a positive loan history can show card issuers that you’re low risk and are capable of paying them back on time. Loans count as credit, so if you pay them back responsibly that positive information will remain on your credit report for 10 years after being closed. Conversely, a negative loan history will stay on your report for seven years. A loan that’s closed won’t help generate a credit score, but it still looks good to lenders on your report. (For more on loans and their connection to credit, visit our Loan Learning Center.)

8. Become an Authorized User 

A great way to get your first credit card while limiting the responsibility and pressure is by becoming an authorized user. Paperno recommends this as a simple way to build your credit score. This way, you can have a credit score without actually having your own credit card. If you eventually want your own card, being an authorized user makes your score and report look significantly better to lenders.

But remember — if the person whose card you’re becoming an authorized user on falls behind on payments your credit will be impacted as well. Choose someone you trust with a good credit history.

Ultimately, choosing your first credit card is a big decision but an important one. Remember to take the time to research and find which option is best for you when opening your first credit card and every card that follows.

Image: PeopleImages

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9 Reasons It’s Time You Got a Credit Card Already

No matter your reasons, there are real benefits to having a credit card in your wallet.

There are many reasons you may have avoided getting a credit card up until now. Maybe you prefer to pay for purchases with cash, or maybe the thought of choosing a credit card seems overwhelming. Maybe you just don’t feel it’s worth the effort. But perhaps all the buzz about the rewards the come from paying with plastic got you considering if now’s the time to get that card. Or maybe something else prompted you to start thinking about it. Either way, there are real benefits to having a credit card in your wallet — nine of which we’re about to highlight.

But first, a quick note: You’ll want to think carefully before you sign up for any credit card, as it’s important to know if your budget can handle those credit card payments that ultimately arrive. You’ll also want to read all the fine print of any cards you’re considering to make sure you understand what responsibilities come along with carrying (and using) that card.

1. Preparing for Emergencies

Even if you already have a savings fund for emergencies, you may not be able to access those funds when you really need them. A prime example is a roadside breakdown. Unless you carry hundreds of dollars in your wallet (not usually advisable), you may not be able to pay for a tow truck or auto repair. In times of emergency, a credit card can help you pay.

2. Paying Off an Urgent Expense Interest-Free

If you need to make a home repair or replace an essential appliance, you may not have the necessary funds at your disposal. When you have an urgent expense that you can’t cover with cash, a credit card with an introductory 0% annual percentage rate offer can help. These credit cards give you time to pay off purchases or balance transfers interest-free. Just make sure you use this wisely, as once that introductory offer expires, you’ll be tacking interest payments on any outstanding balance you have. (You can read more about APRs here.)

3. Building Credit

If you have poor credit or no credit history at all, a credit card is a great way to build stronger credit, which can pay off in the long run as you make important financial decisions. If you’re not sure where to get started, you might try a secured credit card. Not sure where your credit is at or what’s happening with it over time? No problem. You can track how your credit card usage affects your finances with a free credit report snapshot on Credit.com.

4. To Get Approved for Future Applications

In most cases, you need strong credit to prepare for future opportunities. If you want to apply for a mortgage, an auto loan or a rental application, having strong credit can help you get approved. Having good credit can also affect the interest rates you pay and other monthly bills.

If you pay for everything with cash or debit, you won’t be able to build your credit as quickly, and you could be denied for applications or pay more in interest.

5. Earning Cash Back

Many credit cards offer cash back rewards, putting money back in your pocket every time you pay. With cards offering special cash back rates on groceries, gas, department stores and other categories, there’s a good chance you can find a cash back card that rewards the way you spend.

6. Earning Travel Rewards

Other credit cards offer travel rewards that can help you get to your next destination. As you spend, travel cards earn points or miles that can be redeemed for expenses including airfare, car rentals and hotel stays. Some cards even offer large signup bonuses, preferred status at airlines or hotels and other travel perks.

You can also travel with peace of mind, as these cards often provide travel protections including car rental insurance, lost luggage reimbursement and even trip cancellation insurance.

7. Protecting Yourself Against Theft

If you carry a wallet full of cash everywhere you go, you’re out of luck if it gets lost or stolen. With credit cards, you’re only liable for up to $50 in unauthorized charges if they occur before your card is reported stolen. Many credit card companies won’t even charge you that $50.

8. For Purchase Protection

Credit card companies often offer purchase protection policies that back up your purchases. These policies may include extended warranties and protection against stolen or damaged goods. Some companies even offer price protection, which will reimburse you the difference if you can find a lower price for a purchase within a certain time frame.

9. For Convenience

Carrying cash is a pain. Credit cards are lightweight, easy to swipe, accepted at most merchants and are largely worry-free.

Image: PeopleImages

The post 9 Reasons It’s Time You Got a Credit Card Already appeared first on Credit.com.

7 Credit Card Tips for Soon-to-Be College Grads

A credit card is one of the best ways to start building credit. Here's a plastic primer for soon-to-be college grads.

We get it, soon-to-be-grad, you’re busy. Finals need to be taken; dorm rooms need to be cleared out. Jobs need to be procured — as does your very first apartment. But amid all these big changes, you’ll also want to make time for some good old fashioned financial literacy. After all, money management is critical to your success in the so-called real world. And, believe it or not, having a credit card can help your overall financial health. Of course, that’s only if you use that little piece of plastic responsibly, so, to help you come out ahead, here are 7 credit card tips for soon-to-be college grads.

1. Get One

Sure, there are plenty of reasons to be wary of plastic. But a credit card is one of the best ways to start building credit — and you’ll need a solid credit score when it comes time to get an affordable auto loan, mortgage, insurance policy or more. If you don’t have a credit card already, you’ll probably need to look into secured credit cards, which require an upfront deposit that serves as your credit limit and are designed specifically for people with thin or bad credit. If you were using plastic while in school, you may be eligible for an unsecured card with better terms and conditions. Of course, that’ll come down to what your credit looks like already. (You can see where you stand by viewing two of your credit scores for free on Credit.com.)

2. Pay Your Bills on Time …

The number one rule of credit cards? Pay your bills on-time each and every month. If you don’t, you’ll likely be hit with a late fee, face a penalty annual percentage rate (APR) and damage your credit — seriously. A first missed payment can cause a score to drop 100 points or more.

3. … & in Full Each Month

Or, at the very least, keep the total amount of debt you’re carrying on the card below at least 30% and ideally 10% of your total available credit limit. Any balance over that could hurt your credit utilization rate, which is the second most important factor among credit scores.

4. Monitor Your Statements

Do it even if you’ve signed up for auto-pay, because fraud, unfortunately, can occur at any time. Plus, you’ll want to be sure your balances aren’t burgeoning out of control. Check statements every day or at least once a week. Make small payments if those balances are starting to climb too high and be sure to report any suspicious activity your spot right away to your issuer.

5. Upgrade When You Can …

The better secured credit cards on the market (go here to check those out) usually provide cardholders with automatic reviews after 6 to 12 months of use that’ll determine whether they can get their deposit back and possibly receive a credit limit increase. Make a note of when you’ll be eligible for that type of upgrade and keep an eye on your credit as you use your card. You may be able to build a score solid enough to qualify for not just an unsecured credit card but a rewards or low-interest piece of plastic.

6.  … But Resist the Urge to Churn

Be prepared to encounter big signup bonuses as you shop around for new plastic. (Example: Earn $150 when you spend $3,000 or more in your first three months as an accountholder.) But refrain from applying for every offer you see. Yes, an extra $150 or a boatload of bonus miles are nice, but too many new credit inquiries (which are generated each time you fill out a credit card application) can damage your credit score and make it harder to qualify for important financing down the line.

7. Know When to Stop Charging

If your spending starts to get out of control, put your card on ice. Literally, if you have to. (That’s actually a better bet than formally closing the card, which can hurt your credit score, though you can do that, too, if absolutely necessary.) Next, come up with a plan to pay down those debts. Rework your budget to come up with some extra dollars you can put toward your balance and, if you’re carrying debt on multiple cards, prioritize payments. Make the minimum payment on all your cards but put the most money toward the balance with the highest APR (which can lower the total cost of your debt.) Alternately, you can pay off the smallest balance first, which could keep you motivated as you work to get back into the black. You can find more strategies for paying down credit card debt right here.

Looking to do some more financial planning pre-diploma? We’ve got 50 money moves you should make before graduation

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