If you have decided you want to start building your credit in college, you are likely ready to start looking at credit cards. A credit card is one of the easiest ways to build up your credit and you will find that there is a myriad of different cards to choose from that will help you earn rewards, points, and more.
Below, we will go over some tips to help you choose the best card to meet your needs as a college student and as a new credit seeker.
- Low Interest Rate
When you start to look for a credit card, shop for one that has a low interest rate. The reason behind this is because if you have an interest rate of 25 percent, you are going to quickly drown in debt.
Many credit cards offer introductory rates of 0 percent, but you need to pay attention to what the interest rate is AFTER that introductory rate. Most credit card companies will offer a rate of about 17 percent, but you will find that this number fluctuates depending on the card and the offers the card presents to you.
Also, pay attention to whether or not the interest rate is fixed or variable. Both of these types of rates can either help you or hurt you. The key difference here is that a variable rate can change over time, so while your rate may have been 9 percent the last two years, it can increase to 20 percent for the next five.
- Cash Rewards
If you are able to control your spending, you should choose a card that offers cash rewards. When you make an eligible purchase on your credit card, you will find that you receive a certain percentage back from your purchase.
Credit cards often offer this percentage as a statement credit, which applies to the amount you owe. The problem with this type of card is that if you like to spend money or if you do not have the funds to pay what you spend; you are only placing yourself into a lot of debt.
You can choose from all types of reward cards including travel points, cash back, and more.
- Annual Fee
You do not want to sign up for a card that has an annual fee. Many credit cards will offer a $0 annual fee for the first year, but in fine print, an annual fee applies after the first year. This fee is not always cheap and can add up quickly, especially if you did not plan on using your credit card or you did not have any money available at the time.
Most fees run about $149 per year. Choose a card that does not have this type of a fee. You will be protecting yourself and avoiding unnecessary expenses. Trust us, there are plenty of cards out there that do not charge a fee.
- Grace Period Times
While you do not want to ideally pay your credit card late, you should find a card that does offer a grace period time in case for some reason your deposit does not come in or you are running short on cash. Some companies will allow you to be 20 days late without an issue. Other companies will issue you a free payment where you can skip a monthly payment.
While the credit card company you choose may have a grace period, you should only use it when it is necessary. The reason behind this is because you can easily become entangled in a web of debt. For example, if you are 20 days late and your statement drop every 30, you make a payment on day 20 and now a new payment is due on or around day 30. You have to extend the bill again and you become consumed in the cycle of debt and floating money around.
If you are looking for a credit card as a college student, make sure the card fits in with your lifestyle and it meets all of your needs. A card that is too expensive annually or through the interest rate will cause problems for you later on down the road. If you have bad credit you will be ineligible for various things like auto loans, apartments, student loan refinancing, and mortgages. These are important for your future, and you don’t want to mess it up while you’re still in college.