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Credit Cards: Avoid Thin Ice

Quest 2010

It’s no secret that credit card companies want your business. And while you may think you can resist the temptation of signing up for a credit card to receive a T-shirt, beach towel or some other gift or offer, many of your peers apparently can’t. In 2009, 84 percent of undergraduates began the school year with credit cards. According to Collegescholarships.org, the average college student graduates with more than $20,000 in debt—nearly 20 percent of which is due to credit cards.

Still, used responsibly, credit cards can be helpful in an emergency and to establish a credit history—but it is important to know the facts and to learn how to use credit cards to your advantage. Here are some tips.

Be Aware of Teaser Rates
Credit card companies sometimes offer low introductory interest rates—or teaser rates—to attract new customers. These rates typically last for only a few months before sharply increasing, so it’s important to read all the terms and conditions of the card and compare offers from several different issuers before making a selection.

Stick With One Credit Card
Just because it’s easy to apply for multiple cards doesn’t mean you should. The average number of credit cards held by undergraduate students is four. It’s easier to manage one credit card and pay off only one bill at the end of the month. Besides, just applying for multiple credit cards can hurt your credit rating.

Also, using one credit card to pay off another is a dangerous practice that should be avoided.

Build A SOLID Credit History
As soon as you start using a card, the payments—whether made on time, late or not at all—become a permanent part of your credit history. A poor credit history can affect your ability to rent an apartment, get a job or buy a car or house. Get in the habit of paying the balance in full each month, which means don’t charge more than you can pay off when the bill comes due.

Always pay on time. Send the credit card payment several days in advance of the due date to allow for mailing time, or take advantage of online payment
options most credit cards companies offer. It’s usually faster and easier. Late penalties are costly and some companies will increase the interest rate to as high as 40 percent if you’re late.

Do not exceed your credit limit. This helps avoid penalties and ensures you will have credit available in the event of an emergency. A $2,000 credit limit doesn’t mean you can afford to carry a $2,000 balance.

Safety First
Review your statements carefully. Contact the credit card company about any discrepancies or errors on your monthly statement as soon as you find them.
Report a lost or stolen card immediately. Keep a copy of your credit card account number and the financial institution’s name and customer service telephone number in a convenient place in case your card is lost or stolen.

Protect your personal information. Never provide your credit card number unless making a telephone, mail order or online purchase. Moreover, don’t let anyone else use your credit card or charge purchases for other people.

Credit cards can be cool—as long as you know how to use them. By following these tips, you can ensure that your credit history doesn’t melt away.  
The Real Cost of Credit
You just returned from spring break with your best friend and your formerly new, but now slightly worn, credit card. Money’s tight. So you plan to just make the minimum payment. What will this trip really cost you?

You spent: $2,000
Interest rate: 17%
Minimum payment: $50
Time to pay off: 59 months
The cost to you: $2,950