by Barbara Swichtenberg
SDN Staff Writer

Credit cards are a part of most students daily lives but they can be as much a curse as a blessing. Properly managing your credit cards is essential to a healthy financial future.

Building your credit history

It is good to have at least one national card (Visa, MasterCard, Discover) on hand to help you build a positive credit history and to provide security in emergencies. When you decide to apply for a card, compare annual fees, interest rates, and introductory offers. And to keep yourself out of debt, try to do the following:

• Pay your balance each month to avoid interest charges
• Pay your bill on time to avoid late charges
• Avoid cash advances, which come with large finance charges and interest that begins accruing immediately.
• Use your credit card once a month to build a good payment history.
• Avoid cards that attempt to charge you an annual fee.

What if you can’t get a credit card? If you have no credit or bad credit, your first card may be a bit more difficult to obtain.

If bad credit is the culprit, do what you can to clean up your history. If it’s something you can pay off, do so and talk to your creditors. Some of them will remove bad marks if you make repayment arrangements. Some companies offer cards specifically to people with bad credit. If you have to start there, keep in mind that they will probably have higher rates and stricter regulations. As soon as you have made enough on-time payments to get a regular card, transfer the balance away from the starter card.

If you just don’t have any credit, there are a couple easy ways to start it. Once you have that first card and make on-time payments for a few months, more opportunities will open up.

• Ask someone to cosign on a card for you to help build credit history.
• Obtain a secure credit card. This is a card that you would deposit funds into and use based on the amount of funds you have available. This is a great way to build credit. Most banks will offer you an unsecured credit card within 6-12 months after opening a secure credit card.

Credit card benefits: shopping for the right card

All credit cards offer some kind of benefits, but often they aren’t as good as they sound. Restrictions can eliminate or lower your benefits and raise your rates, so make sure you read all the fine print before you sign anything. One late payment can also change your entire agreement, even if that specific card payment is not late. Many companies will routinely run your credit report and if you have paid anything late they can penalize you on their card. Some common card benefits and their pitfalls include:

• Low balance transfer rate –- If you transfer the balance from another credit card, they will give you a lowered rate. There are a couple things to watch out for. First, how long is the low rate good for? For many cards, your balance transfer goes up to the regular rate after as little as 3 months. Look for one that offers the lower rate for the life of the loan. There may also be a one-time fee, usually a percentage of the balance transfer. There is one major potential drawback – if you charge anything else to this card besides the balance transfer, your payments will likely go towards your lower interest balance first. Depending on the company, they may allow you to specify that any additional payment above the monthly minimum be applied solely to the higher-balance new charges.
• Lower introductory rate — Again, how long is it good for? 12 months is average but there may be restrictions and the length is often based on your credit report. Make sure you find out how long your specific period is. Also, is interest charged retroactively on any balance not paid when the introductory period ends? This is common with store credit cards. What will the post-introductory rate be? Often companies use a low teaser to cover up a high regular rate.
• No annual fee — This is often for the first year only. There are so many options available it is rarely to your benefit to take a card with an annual fee.
• “Points” systems — Some cards offer points as a benefit. Find out what specifically you can get with your points. If there’s nothing you need they won’t do you much good.
• Fraud protection — The law limits your liability anyway, so protection shouldn’t be a big part of your decision. If it’s free, it certainly doesn’t hurt. But it’s not really something worth paying for.
• Membership rewards — Many companies give you a percentage of your charges back at the end of the year, but not always for all charges. There are usually some types of charges excluded, such as utilities, or it may only apply to purchases at specific retailers.

This leads us to a question many students have asked: “Can I pay for my tuition with my cash-back credit card and then pay off the balance with my student loans?” The answer is: quite possibly. But it’s up to you to consider the possible benefits and drawbacks of doing so.

Credit cards can be a lifesaver during your college years. They can help you build a credit history and provide a safety net for emergencies. They can also cost you a fortune if not handled properly. Use care with your credit and graduate with a clean report.