Purchasing Power on College Campus

Beware of the credit card trap

By Crystal Conde

Credit card companies bombard students with card offers on many college campuses. To persuade you to apply for a card, company representatives may hand out T-shirts, key chains, coffee mugs, and other products. You may want to have a card for emergencies and for establishing a healthy credit history.

Be careful: some of the cards have high interest rates and limited credit lines. You should understand that credit cards, when used properly, are an effective means for building a good credit history. But when used carelessly and irresponsibly, credit cards may do more harm than good—you may find you're in debt and the victim of a bad credit report for years following graduation.

With credit cards so easy for college students to obtain, you may be wondering why companies view them as appealing card holders. The answer is loyalty. Credit card companies know that students tend to use their first credit card long after graduation. Evidence of the desire to gain college students' business can be found online. Visa, MasterCard, and American Express have information and online applications tailored just for students.

If you've decided a credit card is necessary, set up some guidelines and ground rules. Make the decision to pay monthly statements on time and in full. Determine the credit card's function: is it for emergencies only or for school supplies and books?

Set a foundation for credit card usage to avoid frivolous purchases. Also, figure out a budget. Put your monthly expenses on paper, and estimate how much you can afford to pay on a credit card.

Your parents may be able to provide the best example for teaching you about managing credit cards. Sit down with them and examine a credit card statement. Your parents can explain what particular terms mean—finance charge, minimum payment, credit limit, cash advance. Your parents can impart some of their credit card wisdom and can teach you to use a credit card properly when you begin college.

When it comes to applying for a credit card, be selective. To stay debt-free, shop for a card that offers the following:

• low interest rates or finance charges
• low or no annual fees
• a grace period for posting finance charges
• other benefits such as warranties, free gas, airline miles

Crystal Conde, a 2001 graduate of the University of Missouri-Columbia School of Journalism, is senior editor at Hobsons in Cincinnati, Ohio. She is the lead content editor on all four editions of The Hobsons U.S. Education Guide.