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Don’t let frosh week credit cards suck you in

The dos and don'ts of picking the right credit card
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Gina Monaco, September 3, 2013 2:59:16 PM

Are you heading back to college or university this week or hitting the campus for the very first time? It’s an exciting time that can also be a bit overwhelming with finding classes, getting books and just navigating your way around campus. Then there are all the financial matters to look after – OSAP loans, tuition fees, and rent.

It’s also a time when the business community is out in full force with special offers to get you to use their services or try out their products like credit cards. There was a time when credit card companies threw everything at you, short of the kitchen sink, to get you to sign up for one of their cards. Representatives were on campus with giveaways like T-shirts, and frisbees, etc. to get you excited about credit cards.

It doesn’t quiet happen like that anymore. The days when students got inundated with special offers are gone. Most campuses have banned that type of solicitation in most areas on campus. While this type of aggressive solicitation is down, those companies that have developed a partnership with the school are still promoted.

So, should you get a credit card? Probably, for a number of reasons – just make sure you get the right one. Getting a credit card is the best way to build your credit, so the sooner you learn how to handle credit the better. If you can, get the card before hitting the campus to avoid any pressure and to allow you a chance to research the credit card market to get one that works for you.

There are lots of rewards programs out there so pick the one that works best for you. Ideally, there should be no annual fee and each purchase gets rewarded with cash back, points or discounts on things you need. For example, if you like movies pick a card that gives you Scene points. Like to eat – who doesn’t? Then get a card that offers discounts at restaurants.

However, with credit comes much responsibility. Don’t get into a debt trap. Use credit wisely.  Try to limit purchases to what’s affordable. If you can’t pay fully pay for your card purchases each month, then you’re spending too much. Consider starting with a low limit like $500 until you get comfortable with your spending habits.

There are two other types of credit cards to consider. One is the pre-paid, the other is a secured credit card. Pre-paid credit cards can be loaded up with any amount – kind of like a gift card. Although they sound like a handy thing to have, they may not be ideal. For one, they won’t help build your credit history and they’re usually not cheap. Generally there are annual fees, ATM fees and fees to reload this type of card. And some cards will charge a dormancy fee if not used in a set period of time. They may be good to have in a pinch and can certainly be used as a budgeting tool, but they may not help you achieve your long-term financial goals.

Secured credit cards, on the other hand, do build a credit rating. Getting one requires a security deposit, which is used as a line of credit. Use the credit card as you would other cards up to the limit, which is the amount you’ve deposited to the card account, which goes up and down as you pay it down. No need to reload.

Once you do get a credit card, remember these two rules: find the right card and only spend what you can pay in full in each month. If you don’t, interest charges and other fees can quickly add up making your owed amount much larger than the original balance.

It’s already costing a lot of money to go to school and it’s going to take a while to pay off those student loans when you graduate. Don’t add to your debt load – use credit wisely.

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Gina Monaco

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