You'll surely find credit card offers stuffed into new textbooks, delivered to your physical and electronic mailboxes, and posted on bulletin boards all over campus. Credit card companies will seize every opportunity to recruit new borrowers especially 18- to 24-year-old, impulse buyers who make small purchases—such as pizzas, DVDs, and the latest T-shirts—that are likely to add up unnoticed. The same demographic group is also unlikely to be able to pay off their monthly balance in full, therefore amassing a fortune in finance charges.
An incoming freshman who has no debt in September can expect to be in the red by May. According to Nellie Mae's most recent credit card usage study, 42% of college freshmen obtain a credit card and average $1500 in credit card debt. By their fourth year, these numbers have more than doubled.
Perhaps it is unrealistic to expect young adults to resist all credit card offers. After all, we are living in an increasingly cashless economy. Sometimes the best bargains on textbooks and clothes can be found online—and those merchants don't take checks. So if you must apply for a credit card, be responsible by following these guidelines:
- Shop for the best interest rate. You don't have to be an economics major to know that a low interest rate is a good thing. But credit card companies often increase rates after six or 12 months, and rates soar when you take a cash advance. Read the fine print and look for the best fixed rate, not just a low introductory rate.
- No fees, please. Some credit card companies charge an annual fee (usually $20–$100) for the privilege of carrying plastic cards with their logos on them. They'll also charge you for late payments or for cash advances. Look for a card with no or low fees—and pay your bill on time!
- Request a low credit limit—enough for emergency purchases. Last-minute travel home may be an emergency; funding a party is not. A credit limit of $500–$1,000 is reasonable.
- Get one card. Managing a credit account responsibly is a building block of a solid credit report, but more cards don't equal better credit. Good ways to establish favorable credit include holding one credit card that you don't "max out" and that you pay on time, opening a utility account (for example, electricity) if you live off campus, and keeping your student loan accounts in good standing.
Credit card offers have infiltrated every college campus, but don't surrender to their attacks. Nellie Mae can help you protect yourself against "bad" debt. Turn to Nellie Mae for more information about borrowing wisely and budgeting, and paying for school with flexible student loans rather than on credit.