Credit Card Details

Let's face it: the world runs on credit. Without credit most people wouldn't own a home, a car or a number of other necessities and luxuries. To obtain loans for larger purchases everyone must first build credit on smaller purchases to prove they are ready for larger loans. This is accomplished with credit cards. Responsibly using a credit card throughout the typical four year college period can lead to an excellent credit score and the resulting purchase power. Other reasons for college students owning a credit card include:

• Purchase Protection - If a credit card is stolen or a purchase was not authorized by the cardholder then that purchase is removed from the credit card balance. Some credit card companies even alert cardholders when a potentially fraudulent purchase has been made.
• Online Purchasing Power - You can't use cash on a website. To purchase books, clothing or other essentials online a college student will most likely need a credit card account of some sort.
• Reservations - In order to book a hotel, rental car, flight, etc. a college student (or anyone for that matter) needs a credit card even if they intend to pay with cash.
• Rewards - Some credit cards offer rewards to college students. Rewards can come in the form of airline miles, vacation packages, retail, cash back, student loan payments, etc. If a credit card is used responsibly the rewards can actually work in the cardholder's favor.
• Emergency Funds - Not to be confused with Spring Break Trip of Beer Money. There are times in college when a few extra bucks for emergency purposes is necessary. For this reason a credit card is a good thing to have.

Before jumping into the world of credit cards there are some things a college student must know.

Credit Cards Cost Money

"The greatest trick the devil ever pulled was convincing the world he didn't exist."
- Al Pacino in "The Devil's Advocate"

The same holds true with credit card companies. Their greatest asset is people who think that they can use their credit card without consequence. When a college student views a credit card as "free money" they get into trouble. Instead of looking at a credit card like a "get out of jail free" card it should be seen for what it is: a loan. And loans need to be paid back. Not only that, credit cards come attached with many other "hidden" costs that college students tend to miss in their credit card agreement. Some of these "hidden" costs include

• Finance Charges - If a college student chooses not to pay the entire balance on their credit card a finance charge is assessed. Since college students have little to no credit history the finance charge is usually high.
• Annual Fees - Some credit cards come with annual fees. These have to be paid for just having the account open. Even if the credit card is never used the annual fee has to be paid.
• Cash Advance Fees - Under no circumstance should a college student rely on a cash advance from a credit card. A cash advance from a credit card usually has a fee per advance and a higher interest rate (usually equal to the default rate). Also, credit cards pay off balances with lower rates first. So even if you pay the amount you were advanced if your credit card has any balance leftover it still counts as the cash advance balance. This means that you're stuck with that high rate until the entire balance on the credit card is paid off.
• Default Rates and Fees - Okay, so you "studied" a little too hard and forgot to make your credit card payment. Now you have a late fee and a default rate. This means that your 9.99% is now about 28.99% and you owe the credit card an additional $30 (depending on which company). This is not a good situation. Try making payments a week in advance and (if not in full) more than the minimum payment amount.

Use Your Credit Card Wisely

A credit card can be a great tool for college students if it's used appropriately. In order to establish a good credit history it's important to avoid impulse purchases on your credit card, make payments on time, pay in full or more than the minimum due, avoid cash advance fees and negotiate lower rates and fees whenever possible.