MAKING A CASE FOR CREDIT CARDS

By Kayleen Chen, finance intern with the Personal Money Management Center

It’s Welcome Week at the university and we hope you take the opportunity to visit the tabling options during Plaza Fest. You’d be surprised with how many questions I personally get when I table for the Personal Money Management Center. More surprisingly, the questions are mostly focused on credit cards.

I’m sure that for some of us, moving forward in life, we may have looked into getting a credit card. Some may have one – or more, some may not. Getting a credit card is not all negative. Credit cards help you build credit, which is beneficial when taking out loans. Often people shy away with the idea of starting a credit card, but today I want to help you out with that decision. If you learn the basics and understand the fundamentals of credit cards, you won’t get buried in the fear of credit card debt.

  • What’s the difference between credit cards and debit cards?

There is a fundamental difference between the two. Although both are accepted in most places and offer convenience, a debit card takes money from your checking account. Whereas a credit card is a loan from a financial institution. A credit card company will charge you interest on your purchases. However you are given a grace period, a time frame where you have the chance to pay in full without an additional charge.

  • Why do I need a credit card?

Credit cards offer an opportunity for students to build a credit history and to prove that they are responsible borrowers. Without a credit history, college graduates may not be able to rent an apartment or qualify for a home mortgage. So, if you don’t want to live in your parents’ basement after graduation, start building a credit history during your college years.

There are other reasons to build a credit history. The interest rate on your car loan and your car insurance rates are determined by your credit history. Also, and importantly for you recent grads, many future employers want to check your credit report and may or may not hire you based on what they see.

  • When should I get a credit card?

Credit cards are serious business. No one under age 21 can get a credit card unless a parent, guardian, or spouse is willing to cosign or unless the underage person has proof of sufficient income to cover the credit obligations. However, it is wise to start building a good credit history. See if your parent will co-sign or add you to their credit card. If they have great credit, this is a good place to start.

  • How do I sign up for a credit card?

In order to sign up for a card, you will need to qualify. These qualifications will include some credit history and a credit score in the high 600s. If you don’t have any credit history, consider visiting your bank where you have a checking account and direct deposit of your income. This is a good place to start.

  • What is the best credit card for you?

If you are a full-time student, a student credit card could be one of your best options. However make sure you do your research. Read reviews, compare statistics, interest rates, minimum payments and other factors. Two of the biggest things you should look into are the annual fees, Annual Percentage Rate (APR), grace period and late fees. Rhetorically speaking, the “best credit card” is found through your self-control and by taking responsibility. View credit cards as convenience, not as a second source of income. Lastly, never rush the decision.

If you need any more information or help, come visit the Personal Money Management Center located in room 317 at the Union. We are here to help you build a great credit report, as well as answer any of your other financial questions. I wish you the best of luck for this new school year, both academically and financially.