Student Credit Cards, Establishing Good Credit

How Can a College Student Establish Good Credit?

Establishing credit is usually easier than you think. First, we are assuming that you're a fresh college student looking for your first credit card. This is a great step to establishing credit But you should learn more about how they can work against you as well as how they can help you establish good credit.

Once you finally find that card you want and they approve you, make sure you don't rack up too much debt too quickly. This will raise a red flag and your credit may suffer. Sometimes students get in over their head and they're not able to make a payment. It's best if you keep a low balance and you will want to make your minimum payments on time each month, there's no exceptions to this. It's even better if you can make the full payment. This will prevent you from having to pay the interest credit card issuers charge. If you miss one payment, it can kill your FICO score!
And may even raise your interest rate.

Know how much you can pay each month before even applying for a card then stick with that amount. Being a responsible and sensible spender will help raise your credit score and your credit limit. Some students start with a pre paid card then switch to the "loan" card after they have worked out a budget to include a credit card payment. Try to never go over your allotted amount.

Don't fret if you get turned down on your first application, even people with established credit face rejection sometimes. Just apply again. There is more than one credit card issuer out there.

Don't know what credit card is best for you?
You can find the credit card that best fits your needs here...

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Credit Cards and Credit Score

Tips to give your credit score an extra boost.

1. Keep the balances balanced
Maintaining a balance that's close to your limit could weigh down your credit score.
If you carry a balance on your credit card, you need to make sure the difference between your credit limit and your balance is 50 percent or less, so if your limit is $1,000, you need to keep your balance at $500 or less. Not using all of your credit is a signal to card companies that you're managing your credit properly. Keeping an even lower balance - 30 percent or less - will boost your score even more. Should your balance go over the 50 percent mark on one card, you need to focus any available financial resources on cutting the balance down, even if it means sacrificing a few daily luxuries until the credit's in check.

2. Eliminate the mistakes
One of the fastest ways to up your score is to make sure it's yours. According to a 2005 study by the Federal Trade Commission, an estimated 8.3 million Americans are victims of identity theft each year. Of those victims, 1.8 million have new credit cards, loans, or financial accounts opened in their name without their knowledge.

An easy way to prevent paying off debts you didn't incur is to keep tabs on your credit score through agencies like FreeCreditReport.com, which gives consumers one free credit report from each of the three major credit scoring agencies each year.

3. Diversify your credit
People don't realize that 10 percent of their credit score is determined by what types of credit you use.
That's determined not only by how you manage revolving debt like Visa, MasterCard, and store credit cards, but also how you handle fixed payments like your car payments or your mortgage payments over time.

Instead of putting long-term purchases on them try taking out short-term one to two-year loans in order to build a diversified credit portfolio. In addition to receiving lower interest rates and more flexible payment terms, consumers who use loans over cards also build positive credit and gain better credit terms in the future.

4. Nip it in the bud!
If you see trouble on the horizon, nip it in the bud! Making a late payment could affect you interest rate, not just on the card you're paying late on, but on all your credit cards. If you know you're going to have trouble making payments, get in touch with your lender and have a discussion about it. We are hearing more and more from our counselors that lenders are willing to look at whether you can put together a different payment plan. Since even one late payment could lower your credit score, preventing disaster before it happens can protect your credit for years to come.

Recent changes in credit card rates, fees and terms

Here are some of the recent changes in credit card rates and fees:

Straight rate increase
* CapitalOne increased interest rates to new customers on 15 cards in February. For example: the Platinum Prestige card increased from an APR of 7.15% to 11.9%; the No Hassle Miles Rewards card from 8.15% to 13.9%


Rate increases for segments of customers
* In June, Bank of America will increase interest rates up to the "low to mid-teens" for cardholders who carry a large balance with a current APR that is less than 10%.

* Discover has also notified a segment of customers of a rate increase in June.


Foreign transaction fees
* Starting May 1, Discover will charge a 2% foreign transaction fee.

* Several issuers (Bank of America, Citi, Simmons) will begin charging a 3% fee for all transactions made outside the US in US dollars. Previously, the fee was not added when foreign transactions were made in US dollars.


Fee increase for balance transfers
* In June, Bank of America will increase the fee for balance transfers from 3% to 4%. This increase will also apply to cash advances and ATM advances.

* Discover will also increase the balance transfer rate from 3% to 4%.


Change in terms
* In January, Chase added a $10 monthly fee and increased the minimum payment from 2% to 5% for those who have carried a large balance for over two years and have made little impact in what they paid off. The monthly fee was rescinded in March after substantial outcry from Chase customers.


"These published changes do not take into account the tremendous number of customers who have had their individual interest rate increased. In today's environment, if customers do anything that show they are a greater risk, they are extremely likely to see their interest rate increased and/or their credit limit decreased very quickly, maybe the next month," says Hardekopf. "This increased risk could come from missing a payment, being late on a payment, exceeding your credit limit or perhaps using too much of your credit limit. To minimize the chances of getting hit with a credit card rate increase, consumers need to make sure they pay all their bills on time, pay more than the minimum amount and not use more than one-third of their
available credit."

New Fee Added on Some Credit Cards

As we approach the enactment of the first phase of the Credit CARD Act next week, credit card issuers continue to make changes that could have a significant effect on consumers.

In September and October, some cardholders can expect more fee increases, some may lose reward points because of a late payment, and more cards will be introduced with high annual fees.

Be sure to check all correspondence that comes with your credit card bill to see what changes you can expect.

Make money when using your credit cards

Most people see credit cards as a debt to be paid every month while some of us view them as a means to make money.

The Benefits of Cash Back Credit Cards

Cash back credit cards pay you a percentage rebate on the money you spend on the card.

Many cash back cards offer as high as a 5% cash back on purchases at supermarkets, drug stores, and gas stations, and 1% on all others. Other credit cards with cash back offers give 5% rebates on expenditures for auto repair, apparel, home improvement stores, and more. You decide which one would be the best for you by looking at your past bills. Then pick one that is best suited for making you the most money. I reccommend the first listed here because we tend to spend more on food, gas and drugs than on car repairs or home improvement.

A 5% cash back is equivalent to a 5% discount on your purchases. If you use a cash back credit card for most of your purchases and routine expenditures, that can turn into significant savings over the course of the year. To maximize earnings, many people like to get additional cards for family members, so that they receive cash back on all household expenditures.

In some cases, you wont earn the full cash back on your charges until after a certain amount of expenditures. Other cards put a limit on the maximum earnings you can accumulate in a year. The rewards on your cash back credit card may also expire after a certain number of months, or if you don't use your card for a period of time. Keep your Credit Card active even if your purchase is in a small amount. The way your earnings are redeemed also varies from card to card. Read the terms of the card you apply for and make a note of the most important points, so you can follow up as needed.

Cash back credit cards are most profitable if you pay your card balance in full every month. If you intend to keep a balance on your card, you might prefer instead to find one that offers a low interest rate.

The secret is to only use your credit card for purchas you would normally pay cash for or for purchases you would use your bank debit card for. Be sure to put this money aside so you will have it to make your monthly payment. This will add up to quite a bit over a period of 12 months.