Applying for your first credit card? Many credit card companies are happy to issue high school and college age students plastic, but before you sign up, it is essential that you know the good, the bad and the ugly of credit cards.
The Good – A credit card helps you establish credit history. When you want to rent an apartment or even open an account with the electric company, you need to prove that you are a good risk—that you pay your bills and loans on time. If you’ve proven yourself reliable with a credit card, you’re more likely to be accepted.
The Bad – Too many people open credit card accounts without understanding the risks. Without a steady source of income a credit card can quickly lead you into debt that’s hard to climb out of. If you open an account, be sure to compare offers and make sure you understand the rules of the bank issuing the card.
What is your spending limit? (Regardless of what the credit card company says, plan on staying within 40% of your limit and even then, only spend an amount that can be paid off in full each month.)
What is the interest rate? Is it compounded daily? Monthly?
When is the bill sent out, and how many days do you have to pay?
What fees are charged, (i.e. annual or late fees) and how much are they?
The Ugly - While using a credit card can establish your credit history, it can be very tempting to make purchases you can’t really afford. And that can create a negative credit history that will take years to re-build.
YOUR 2 CENTS – What’s your opinion? Do students need a credit card?
Related posts:
- What Happens If I Have Credit Card Debt And Can’t Pay? (Part 2)
- Is There A Way To Have A Credit Card But Only Use It For Really Expensive Things?
- What Happens If I Have Credit Card Debt And Can’t Pay? (Part 1)
- Tips For When You’re Behind On Your Credit Card Payments
- What Factors Are Used To Figure My Credit Score?