'Mellody's Mail': Credit Card Tips

Q U E S T I O N: I am a college student and know it's important to have good credit. I also heard that college is a good time to sign up for credit cards. I see people around campus trying to get students to sign up and if they do they get a free T-shirt. I avoid those people, but I am also thinking about getting a card that has some benefits like frequent flier miles. How can I be a better consumer when it comes to choosing a credit card?

A N S W E R: With the summer coming to a close and many students heading back to school in the next month, your question is a timely one. As you know, college students are bombarded with an onslaught of credit card offerings each fall and many are quick to respond to these enticing offers. In fact, according to a study by Nellie Mae, students triple the number of cards in their wallets and double their credit card debt between freshman and senior year.

That said, learning how to be responsible with credit cards is an important lesson. Although we often talk about the dangers of credit cards, if handled responsibly, there are many positives. As you mention, one of the most important reasons for a young person to get a credit card is to establish credit. Once a young adult graduates from college, having a solid credit history is an important factor to succeeding in the real world. For example, without a credit history, it might be difficult to rent an apartment.

When it comes to choosing a credit card, there are a few factors you should assess. Most importantly, you should look for a card with no annual fee and a low interest rate, and be sure to understand the financial penalties for late payments. (Credit cards with benefits, such as frequent flier miles, tend to have an annual service fee, so you should be mindful when looking into this option.) You should also pay attention to the maximum spending limit. Although many cards allow for high spending limits, you may want to request a lower limit in order to keep your spending in check ($500 might be a good start).