6 Things College Students Always Forget When Choosing A First Credit Card
Having a credit card isn't for everyone. If you're lazy, disorganized or compulsive, you might want to shy away from a credit card. However, if you're responsible and disciplined, credit cards are a great addition to your wallet.
Credit cards offer convenience, rewards, perks and benefits. They can also help you develop a credit history, which is important if you ever want to get a mortgage and make the move out of your parent's basement.
However, with thousands of credit cards to choose from, selecting the right credit card isn't as simple as it seems. Here are a few suggestions on how to cut through the clutter.
1. Apply for a credit card you'll get approved for.
Many of the best credit card offers with the highest welcome bonuses and richest benefits are reserved for big spenders with excellent credit. You're not there yet.
Select a card that doesn't require a previous credit history. This may be a student card or a retail credit card. It will come with a smaller line of credit that lenders are more comfortable issuing to someone who hasn't proven creditworthy just yet. Don't get disappointed with an initial line of credit of $500. Once you establish a history of paying your credit card bill on time, you'll be offered a credit line increase in short order — usually within six months or so.
Also, make sure the credit card doesn't come with a significant minimum income requirement. Some student credit cards will verify you have some type of part-time income. If that's an issue for you, there are plenty of alternatives. Just make sure you read the small print so you don't waste your time.
2. Get a credit card with rewards.
Just because you're looking for your first credit card doesn't mean you have to settle. There are plenty of options for student credit cards with rewards and no annual fee. Once you're going to use a credit card, you might as well get rewarded for your spending.
Consider which type of rewards card best suits your preferences and habits. Are you looking for simplicity and transparency? Perhaps a cash back card is best for you. Spend a lot online and at restaurants? Maybe there's a rewards card that will give you more rewards for those categories than elsewhere.
If you're having trouble evaluating rewards programs, just get a cash back credit card — cash is still king. Everyone knows the value of 1 percent cash back. Not everyone can figure out the value of a point or mile.
3. Look for a credit card with a welcome bonus.
Although you won't get a welcome bonus as large as those reserved for the best travel credit cards, there are still plenty of student cards offering incentives to apply for their card. While a $50 welcome bonus won't let you retire, it's a free night out on the town.
When you think about it, if you're earning 1 percent cash back on your credit card, a $50 welcome bonus is worth $5,000 in spend. So when you compare credit card offers, don't just look at the rewards rate, take a look at the welcome bonus. It's the fastest way to beef up your rewards bank.
4. Get a credit card with strong benefits.
Aside from rewards, some credit cards offer exceptional perks and benefits. While you won't get access to the best benefits out there on a no-fee student credit card, there are still some benefits available that are worth getting. Specifically, get a card that provides you with extended warranty and car rental insurance. Some cards even offer complimentary cell phone insurance.
5. Research your options.
Before you make any decision, do your research. Most people get the first credit card their bank upsells them. Don't be lazy; you could leave a lot on the table. Go to a few credit card comparison sites and see which cards offer you the features you value most.
During your research, you will likely see some secured credit card options marketed to people who need to establish their credit. If you're a student, those cards are not meant for you. There are plenty of unsecured options that are far cheaper and don't require any security deposit.
6. Stay out of trouble.
If you can't guarantee that you're going to pay down your credit card statement in its entirety at the end of every month, don't get a credit card. You'll end up paying more in fees than you'll get in rewards. Moreover, instead of building your credit history, you'll destroy it.
Regardless, if you do get a credit card, the best way to stay out of trouble, especially if you're not the most disciplined person, is to pre-authorize payment of your entire credit card bill before the due date of every credit card statement. Do that, and you'll stay out of trouble without having to think twice.