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What Every College Student Should Know About Credit Cards

According to a recent study, 83% of college students have at least one credit card. Credit cards have become a way of life for many college students. Obtaining a credit card is usually no problem. From the time a student arrives on campus, representatives from credit card companies are handing out t-shirts, mugs, and other "freebies" just for filling out a credit card application.

Credit cards can be a tool or a trap. The best defense against college credit card solicitors is to educate your student about the importance of using credit wisely. Below are some suggestions from the University of Illinois Cooperative Extension:

• Shop around for a card. Look for credit cards with low interest rates and minimal finance charges. Avoid cards that charge an annual fee and/or a fee to transfer balances.
• Watch out for teaser rates. Credit card companies offer low introductory rates to attract new customers, especially students. Then these rates increase after only a few months. Look for a credit card with a moderate interest rate that does not disappear.
• Use only one credit card. It's easier to manage one bill at the end of the month.
• Pay in full and on time every month. It's important to pay bills in full. If this is not possible, encourage your student to at least pay more than the minimum payment due each month. Paying only the minimum amount does not reduce the amount owed very much because of interest charges added.
• Avoid cash advances. The fastest way to accumulate interest and fees on a credit card is to borrow money as a cash advance. Most card issuers charge at least 20 percent interest for cash advances. Issuers may also charge a fee for each cash advance with no grace period for paying it back. If your student needs cash, talk with them about other alternatives.
• Review statements. Encourage your student to check their statement each month. If they see something on their statement that is incorrect, they should call their credit card issuer immediately and follow up with a letter detailing the problem.
• Protect credit information. Limit the number of credit cards your student carries. They should not share their account information with friends or classmates or give out credit card information over their cell phone.
• Report a lost or stolen card immediately. Have your student make a list of all of their credit card information including the card issuer, the card number, the expiration date, and the number to call in case their card is lost or stolen. Have them keep this information in a safe and secure location. Should they lose their card or have it stolen, they can immediately contact their issuer to minimize liability for any unauthorized use.
• Good financial habits last a lifetime. Following these basic credit guidelines will help put your student on the road to financial success. Moreover, it will help him or her build a good credit history and become a wise credit consumer.

For additional resources to help you in talking with your student about credit, visit the University of Illinois Consumer and Family Economics Web site at: www.ace.uiuc.edu/cfe. On this Web site you can find credit card calculators and fact sheets about responsible credit card usage.