Credit card deals are out there, but college students should look past hype

by Shelton on September 22nd, 2015

filed under Student Credit Cards

What should you look for when shopping for a credit card for college? Here are five tips:

1) Dont get wowed by the signing bonus.

Yes, some credit cards are offering whats seen as a signing bonus to college students.  The BankAmericard Cash Rewards Credit Card for Students, for example, has an online deal for a $100 bonus, if you make at least $500 in purchases in the first 90 days of opening your account.

How are you going to spend $500 on that card? Maybe, youre thinking youd charge your tuition?

Nope, wont work here. I went online to the Bank of America site and asked that very question via an online chat.

The online reps answer: Tuition fees wouldnt be counted. Only purchases made at retail store or online are counted.

Dont be tempted to spend more than whats within your budget to get a bonus.

2) Pay attention to the limits of 0% offers.

Student credit cards are offering some introductory rates of 0% on cards. But some of those intro offers can range from six months to 12 months. Many of the 0% offers are on purchases; only a few offer 0% on balance transfers.

When you get busy on campus with term papers and tests, its way to easy to forget that your 0% rate is no longer available at spring break.

3) Credit unions could have great rates for students, too.

Banks are trying to build long-term relationships with college students with some of these deals. But its wise to shop at credit unions, such as those connected to various universities, to see if you could get a lower credit card rate and a better deal.

The University of Michigan Credit Union, for example, has a Visa Platinum OptimUMcard with a rate of 8.9% thats offered to all credit union members. The rewards card version of this card has a rate of 12.9%. There is no annual fee and no charge for balance transfers.  But there is a 1% fee to convert foreign transactions into US dollars.

4) Pay attention to fees and rates.

Some cards marketed to students do not have a penalty APR, meaning your annual percentage rate wont go up for missing payments. But there might be other fees. Discover It Chrome for Students, which does not have a penalty interest rate, will waive your first late payment fee. But after that, the late payment fee can be up to $35.

You want to review potential late fees, as well as interest rates.

Rates on some cards could be variable rates and set to go up after the prime rate heads higher. Its not a small point, especially since most economists expect the Federal Reserve to boost rates in the next few years.

The Capital One Journey Student Credit Card lists a rate of 19.8% but its a variable rate that would go up with the prime rate. The card does have a credit tracker to help students monitor their credit score, as well as other tools to help students use credit wisely. It also offers 1% cash back on purchases, plus an extra 0.25% cash back if payments are made on time.

Andrew K. Johnson, a spokesman for GreenPath Debt Solutions, a nonprofit credit counseling agency, said too often college students wont shop for interest rates on credit cards. Instead, theyll take whatever is offered. But its easy for debt to build when rates are higher and when students dont effectively manage their money.

5) A wide range of interest rates can be given on student credit cards.

Your friend might qualify for super-low rate of 11% or so on a student credit card, but you might get a rate of 19% or 22% on some cards.

The Citi ThankYou Preferred Card for College Students, for example, offers a range of rates of 13.99% or 18.99% or 23.99% on purchases depending on your creditworthiness. Again, those rates will vary with the prime rate. The card has a 0% intro rate on purchases for seven months from the date of opening the account. The penalty APR is up to 29.99%.

The keys to building a strong credit score are to keep credit card balances low and pay bills on time every time for a very long time, said Schulz at CreditCards.com. Experts say its best to sign up for mobile alerts to stay on top of when the bills are due, as well.

The No. 1 job for anyone with a credit card is to pay your balance off as soon as you can, Schulz said.

Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow Susan on Twitter @tompor.