Credit card tips for college students
Back in 2009, college students seemed to have a love affair going on with their credit cards. About 84 percent of college undergraduates had at least one credit card, according to a study then from Sallie Mae. Seniors were graduating with an average credit card debt of more than $4,100 in 2009, up from about $2,900 in 2004.
By 2016, only 56 percent of college students were carrying credit cards, according to another Sallie Mae report. Credit was tougher to get after the financial fallout.
Lately, college students are seeing offers pop up in the mail from cards, like Discover it Student Cash Back, or credit card offerings from their own banks or credit unions. Credit is out there, possibly with a parent as a cosigner.
Here are some tips when shopping for a credit card to take to college:
■ Look for the best credit cards for college students
Some credit cards are designed for people with high incomes and excellent credit histories — not college students, said Bill Hardekopf, CEO of LowCards.com.
So don’t apply for just any card that has great rewards. Look for cards that target students.
If you have a college checking or savings account, try applying for a credit card from that specific bank or credit union, Hardekopf said.
“Having an existing, healthy relationship with the bank — especially if you have money in a savings account with them — can help improve the chances of being approved for a credit card,” he said.
Some cards are marketed for college students including the Journey Student Rewards from Capital One, the Discover it Student Chrome and Bank of America Cash Rewards credit card for Students, according to WalletHub.com.
■ Know the real cost of borrowing
Credit card rates might come with a 0 percent introductory offer. But rates can skyrocket after that intro period ends in six months or so. Often, variable rates can range from around 15 percent to 25 percent.
“Obtaining a credit card in college can be a great way for a young person to establish a good credit history, provided that all payments are made on time and that balances are kept low,” said Mark Munzenberger, financial education specialist, University of Michigan Credit Union.
At the same time, college students should establish or maintain a savings account for unexpected expenses instead of using a credit card to take on debt, Munzenberger said.
■ Keep credit card balances low
Don’t get into the habit of charging $250 or $300 on a card that has a $500 limit. Ideally, you’d want to charge less than 10 percent of the limit, or $50 on a card with a $500 limit, to get the best credit score, said John Ulzheimer, a credit expert who formerly worked for credit-scoring company FICO.
■ Work toward building up your credit score
There are some simple steps you can take toward a better score.
You can obtain free credit reports at www.annualcreditreport.com. Make sure there aren’t any mistakes or signs that an ID thief opened up a credit card using your name. An inaccurate report can drive down your credit score.
Susan Tompor is a personal finance columnist for the Detroit Free Press.
‘Obtaining a credit card in college can be a great way for a young person to establish a good credit history, provided that all payments are made on time and that balances are kept low.’ Mark Munzenberger
Financial education specialist, University of Michigan Credit Union