For many of us college was the first time we used plastic money. College being the first time that we are independently responsible for finances, and obtaining a credit card is an experience that can make or break our financial future. Credit cards can establish good credit or drive a student deep into debt. Not only do students have to avoid the temptation of using their credit card like cash, but they are also inundated by special offers and gifts for opening new accounts.

Like a friend of mine who reviewed her credit report shortly after graduation; she was with a dozen or so credit card accounts that she didn’t even know she had. You know what they were from? Each time she’d fill out credit card applications to receive free t-shirts and discounts at retail stores she was actually being approved for a new credit card.

Despite all the criticism about college students and credit, now is a good time to get your first card and start building your credit history, as long as you can be sure to pay off the card each month. Graduating with thousands of dollars of debt is a bad idea, especially when you’re also paying off student loans and trying to make ends meet on an entry-level salary. It is important to be educated about your options and how their use can affect your credit score and finances.

College students are prime targets for banks and credit lenders, so don’t be lured by free flat screens, laptops and t-shirt offers while on campus. Credit companies prey on college students who are anxious to spend money, have not developed any money habits, and are generally naïve as to how credit cards work. Eighteen-year-old students often view credit cards as free money, which the lenders count on. The more students charge, the more likely they will incur late fees, maintain balances on high-interest credit cards and pay the minimum payment, keeping them as debt-accumulating customers for years to come.

What to Look for When Choosing a Credit Card in College?

Not all credit card offers are created equal. When picking your first credit card, make sure it is a major credit card, such as a Visa or Mastercard. Even with or without credit history, you should be able to get approved for a credit card with a annual percentage rate (APR) in the mid-teens. This is the rate you are charged for any credit card balances that you carry, or don’t pay off in full the previous month.

Although you can find an offer for 0% APR for the first 6 – 12 months, don’t take this as an invitation to go on a spending spree. Do take advantage of credit cards that offer rewards programs, such as AMEX Blue Cash, which offers 5% cash back on purchases. Over the course of time you can earn some extra money, travel points or other nice gifts.

Your credit card should not have any annual fees, and make sure there is a grace period for your payments. While cramming for finals, you may forget to drop a check in the mail to pay your balance. If your credit card has a 20 day grace period, you’re in the clear.

What to Look out for with Credit Cards

While credit cards can bail you out in an emergency and help you establish a good credit history, watch out for these pitfalls:

You’re a Target: Generally speaking, college students are irresponsible with money, have no experience with paying their bills and managing finances, and will do anything for a free t-shirt.

Never Take a Cash Advance: Cash advances on your credit card are deadly. The interest charges you will incur will be exorbitantly heavy and the interests starts accumulating the moment you receive the cash.

Don’t Overdue It: Maxing out your credit card can actually damage your credit score. Stay below 30% your credit limit in order to establish a good credit history that will build a good credit score. In other words, if you have a $1,000 limit, don’t use more than $300 of your credit.

Only One Card is Needed: Having multiple credit cards is just a disaster waiting to happen. As a college student there should not be a need to have more than one credit card.

Credit cards can be a very helpful tool to help you establish or build credit and assist when you need money in an emergency. It is very easy to fall for the temptation to spend more than can be handled, which is not a good way to start your financial future. Only spend what you can afford and only charge what you intend to repay in full when you bill is due at the end of the month. Now is the best time to get a credit card as The Credit Card Accountability Responsibility and Disclosure Act of 2009 will make it much harder for college students to obtain a credit card beginning with the law’s effective date (February 22, 2010)… Click Here To Read More