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Credit cards, and credit scores and credit reports, oh my!

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Courtesy of forbes.com
Credit cards can seem intimidating for those students who haven’t yet applied for one.

BY
Staff Reporter

According to wallethub.com, about 57% of undergraduate students reported having at least one credit card by the time they graduated from undergraduate school.

While it is less common for students to open their first credit card in highschool, it is recommended for students to apply for their first credit card in college. There are several benefits for opening a credit card sooner rather than later. One of the biggest advantages is the ability to start building credit history.

“A good credit history could mean a lower interest rate on things like a mortgage or car loan,” Andrew McMartin, university accounting professor, says. “Another is additional protection in case of a dispute. The Fair Credit Billing Act requires card issuers to address disputes between card holders and vendors that charge your card.”

Credit cards are unique in that they act as the middleman between you, the vendor and the bank. In other words, credit cards are an additional protection throughout your transactions. They are especially important for the security of online purchases. According to Professor McMartin, there are vendors that try to avoid the possibility of a dispute with the banks by offering a small discount to customers that pay in cash. However, depending on the vendor, it might be best to pay with credit cards for the additional protection.

Although credit cards have numerous advantages, there are a few things to keep in mind while applying for specific banks’ offers. For example, credit cards that come with fancy reward programs will easily draw students in, but students should be weary of them, considering they often come with hidden fees and excessive interest rates. According to CBS News, after late payments, most banks charge for cash advances. The other common extra charges include balance transfer fees, which about 90 percent of the cards charge. Additionally, banks like First Premier and Credit One can include extra charges like foreign transactions fees. 

In addition to getting your first credit card, students should also be aware of getting into the habit of checking their credit reports every year. A credit report is where data is collected on individuals relating to if they are approved or denied, their credit score limit and their given interest rates. The three private companies that collect this data are Equifax, Transunion and Experian. The two aspects of the credit report that should be checked are what information they are tracking about you and if there is any fraudulent activity, like identity theft, on the report.

“False information can sometimes show up on your report and an annual review can help catch these errors early, ” McMartin says.

For this reason, many students do not get credit cards until college or when they feel responsible enough to be able to keep track of their spending. Many students begin with debit cards since they are hesitant to apply for credit cards. The first step in thinking about credit cards is to know their terms and conditions.

“I was a little bit scared of it to be honest, in the concept of having credit card debt,”  Josie Cort, a junior marketing major, says. “I didn’t necessarily want to pursue it because I didn’t necessarily understand the difference between debit and credit except that I knew credit scared me.”

Although college is a good time to start building credit, many college students face hardships in opening their first credit card as they are denied by banks due to their lack of credit. Banks are strict in allowing students to open credit cards as most students do not have a high rate of annual income. However, some of the most successful student cards are the Chase Freedom Student credit card, the Journey Student Rewards from Capital One and the Discover it Student Cash Back Card.

The Chase Freedom Student credit card is great for students who want simple rewards and easy-to-earn bonuses. There is no annual fee and users earn 1% cash back on all purchases. Additionally, there is a $50 bonus after making your first purchase within three months from opening the account. Furthermore, the credit limit will be increased after making five monthly payments on time.

The Journey Student Rewards from Capital One is ideal for students who want “flat-rate cash-back rewards.” This card also does not have any annual fees or foeirgn transaction fees and users earn 1% cash back on all purchases. This is particularly useful for those students who want to study abroad or travel internationally. There is also $0 fraud liability if your Capital One card is ever lost or stolen. The credit limit will be considered for an increase after you consistently pay off your balance every month in a six month time frame.

The Discover it Student Cash Back card is the perfect option for students who want cash rewards and are just starting to build their credit. Like the other cards, there are no annual fees, but with Discover, there is also no late fee on the first late payment. In terms of cashback, Discover has “unlimited cashback match,” where they will match all the cash back you have earned at the end of your first year. Discover also provides the ability to earn 1% cash back on purchases, however Discover has a unique offer where you can earn 5% cash back on everyday purchases at different places each quarter like Amazon and gas stations like Exxon, Mobil and Shell. Lastly, Discover has incentives like good grades rewards where students can get a $20 statement credit each school year if their GPA is 3.0 or higher. Many students choose Discover as it is the most lenient for people who have no previously established credit.

“I literally couldn’t get anything else,” Cort says. “I got discouraged pretty fast… I applied to like three other ones and they were like ‘haha, no you don’t have a credit score.” 

“With Discover, when I got the card through them, it was the student card,” Brad Melzer, a senior business major with an accounting finance specialization at Washington College, says. “So, that became really simple because they recognized that it might be my first credit card. They made it really simple to set it up.” 

Opening a credit card now will enable you to start building the necessary credit that you will need in the long run. If you take action now, it will only improve your life in the future.

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