As the fall semester begins, credit card companies will be focusing on acquiring new student credit card customers. Certain provisions of the CARD Act prevent these companies from setting up shop on campus and trying to lure in students with free t-shirts and pizzas. Nevertheless, student mailboxes will quickly fill with credit card offers and many students will be anxious to acquire their first card. Unfortunately, choosing the right student credit card is not an easy decision and the majority of students are ill-equipped to understand the complexities of credit card offers. While this is equally applicable to many adults, students who get off on the wrong foot risk setting themselves up for years of credit card headaches.

Here are some tips to avoid making credit card mistakes:

Look for Low Long Term Interest Rates, Not 0% Rates

A good majority of student credit cards will boldly promote 0% interest rates. These are known as teaser rates and typically apply to new purchases. The duration of 0% APR credit card rates will vary from offer to offer, but for the most part, these tend to last about 6 months. During introductory periods, no interest is charged on new purchases. This is obviously appealing in the short-term, but unless students are able to pay their bills in full before the rate expires, a 0% intro period can mask the cost of carrying new debt.

Thus, while 0% rates can provide some savings in the short-term, the key area of the fine print to examine is the go-to APR. This is the interest rate that will be charged once teaser rate expires and students should seek out cards that have as low of a go-to rate as possible, as this rate will determine how expensive credit card debt becomes.

Credit Card Bills are the Most Important Bills

A student credit card can be extremely helpful in building credit if used correctly. They can also wreak havoc on credit if mismanaged. Paying credit card bills on time is of the highest importance, as late payments can severely damage credit, not to mention lead to some costly fees. Consequently, credit card bills should be given top priority. Paying a cable or electric bill a few days late will result in a minimal penalty and generally will not be reported to credit bureaus. But paying a credit card bill one day late will lead to expensive fees, negative credit report marks, and potentially higher interest rates.

Credit Card Limits are Not Money in the Bank

Getting a new credit card with a few hundred dollars of credit can make a student feel less poor than they currently are. However, using student credit cards to pay for expenses that otherwise could not be afforded will lead to debt, which will lead to interest expenses that compound daily. Credit limits should be viewed as a safety net and preserved for emergencies. Use them when necessary and always with caution.

Finally, it is vitally important to never use student credit cards for cash advances. Credit card companies often send cash advance checks in the mail that can be used as cash. These checks can make getting into debt easy and vastly increase the difficulty of getting out of debt. The primary reason cash advances must be avoided is that, unlike purchases, interest rates are often in the mid to high 20% range. 29.99% cash advance rates are not uncommon and, at these rates, paying only the minimum due will fail to reduce your debt at all.

Ultimately, the key thing for students to keep in mind when considering credit cards is that these pieces of plastic are sophisticated financial instruments. Until they are understood, they should only be used with extreme caution.

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