Friday, 2 June 2017

There's more to being a college student than getting an education and being on your own.

A bright future starts with good financial choices. By now, you've already gotten the scoop on financial basics that will start your student life ahead of the game.

Let's go a step further and explore credit cards, which can be both a potential lifesaver and pitfall for college students. 

The pros and cons

As you begin your college career, you'll be courted by credit card companies eager to stamp your name on a magnetized piece of plastic. There's a strong allure to whipping out that card and charging almost anything you want right on the spot.

Credit cards can be a source of early—and unnecessary—financial trouble for many college students. One of the most important things for students to remember is to respect the credit limits. Your line of credit should be treated as a saving grace for unplanned emergency expenses, as opposed to a challenge to buy as much as you're allowed to spend. Also, try not to carry a balance on your card, and don't spend more than you can pay off each month. This saves interest charges and keeps you out of future financial trouble.

With those points in mind, let's have a look at how to weigh all of those credit card offers out there. This way, you'll find a better match between what credit card companies are offering you and your financial needs. 

Not every card is equal 

When you're in the process of selecting a credit card, there are a few things you need to consider before applying. All of these will affect how much money you'll spend on purchases, annual fees, and interests rates. 

1. Annual Fees. When reviewing a credit card offer, be sure to understand whether there will be an annual fee simply for having the credit card. Annual fees are quite common, though some cards come with no annual fee at all.

2. Annual Percentage Rate. Credit cards come with annual percentage rates (APR), which essentially reflect the interest rates that will be charged on all of your purchases that aren't paid in full before the next billing cycle. Often, special (sometimes higher) APRs apply to transactions that are not true purchases, such as cash advances and balance transfers. A cash advance occurs when you use your credit card to request cash from your lender, rather than to finance a purchase — for example, to get pocket money at an ATM. You make a balance transfer when you move existing debt balances onto the card. Be sure to read up on which APR applies to each type of transaction before accepting a credit card offer.

3. Promotional Interest Rates. Promotional interest rates—which can sometimes be as low as zero percent—can be helpful for students who want to consolidate some higher balance or higher interest rate credit cards onto one new card. But, they always have an expiration date. Some cards have multiple promotional rates, with different expiration dates for different types of transactions. Should you use a promotional interest rate to transfer balances from other cards, be sure that you'll be able to completely pay off those balances you transfer by the end of the promotional period—before you're left with yet another outstanding balance.

4. Other Charges. Remember to compare late fees and over-the-credit-limit fees when deciding which credit card is right for you. While we never plan on incurring these fees, it's smart to know what you might be paying in the event of an unplanned financial situation.

5. Card Benefits. You're going to be presented by cards with various perks associated with them, such as airline miles, points-per-dollar spent, discounts, and cash back bonuses. Keep in mind that cards that offer perks typically come with annual fees or slightly higher interest rates than those without. It's another criteria to consider when choosing the best card for you. Using your card wisely can give you a solid credit rating over time, opening the door for future credit-based purchases like homes and cars. Never go over the limit, keep your balances low, and make payments on time—and you'll be on your way to a low-stress financial life, even beyond graduation. 

If a credit card doesn't seem like the right choice for you, you may want to consider a prepaid debit card, like ClearSpend. It comes with an app to help you budget and keep track of your finances

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