Credit on campus, what you need to know

PSECU

Throughout your time spent in college, there will be several opportunities to apply for credit cards based on your newfound independence. Here are some things to consider when choosing a card.

Credit Cards for College Students

Companies that advertise credit cards will often target college students because they are in need of money to cover the high expense of college. Make sure to do plenty of research before applying for a credit card. Read reviews online and look at all terms and conditions beforehand. Doing your research now could save you financial trouble in the future.

Things to Look for in a Credit Card

Credit Limit

Any credit card you are approved for will have a credit limit. A credit limit is how much money you are able to charge on the card. The average credit-using college student has a limit of $1,339.

Regardless of your credit limit, it is important that you do not carry a high balance because it can hurt your credit and cause you to pay interest. In order to keep or build a good credit score, you will want to maintain a low credit utilization rate. A credit utilization rate is the percentage of revolving credit available to you, such as credit cards, that you are using. For example, if you have two credit cards with a total credit limit of $10,000 and you have a balance of $5,000, you have a 50 percent credit utilization rate. To keep your credit healthy, it is typically recommended that you aim for a credit utilization rate of no more than 30 percent.

Fees

Most financial institutions charge fees associated with credit cards. As part of your research, identify the types of potential fees and whether or not the company charges them. Annual fees are important to look for, they are charged simply for having an open credit card account. If the credit card you are being offered has an annual fee, this may be one you want to stay away from. Many credit cards for college students have no annual fee at all.

A balance transfer fee is another fee to consider. This is typically charged by a credit issuer to transfer the remaining balance from one account to another. If you have a high amount of debt on a credit card with a high interest rate, you may be able to transfer that balance to a card with a lower interest rate to save money. Fees to complete these transfers vary based on the cards and companies.

Annual Percentage Rate

Annual Percentage Rate (APR) is the rate at which the credit card company will charge interest on the balance on the card. It is important to check a card’s APR to get the lowest rate possible.

Watch for special offers and promotions on credit cards. Companies often extend a credit card to new customers with a 0 percent APR for an “introductory period,” which can be the first three months, six months or even a year. While this can help you develop a system of paying off and maintaining a credit card, make sure you know what the APR will be after the introductory period ends.

Rewards

Some credit cards offer rewards for certain purchases made on the card. The rewards can vary, including cash rewards, airline miles or hotel points. Reward programs are a benefit you should consider when choosing a card, but it should not be the only factor. You want to make sure that there are not costs of having the card that outweigh any rewards you can earn.

Building Your Credit

Once you get a credit card, using it responsibly can help you build and improve your credit. Here are some quick tips.

  • Pay your bill on time each month. A good payment history is key to a good credit score.
  • Do not make a big purchase unless it is an emergency. Remember – you want to keep your credit utilization rate low.
  • If possible, pay off your balance in full every month. Carrying a balance may mean paying more in interest.
  • Keep an eye on your credit score. Knowing your credit score helps you evaluate how you are doing. Check out PSECU’s free credit score service* for qualifying members.

Credit can be a complex financial topic to understand. It is important to start early by building a good credit history. By following these tips and having a better understanding of credit, you will be working toward a bright financial future.

*PSECU is not a credit reporting agency. Members must have PSECU checking or a PSECU loan to be eligible for this service. Joint Owners are not eligible.

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