Welcome to that time of year when college campuses are full
of credit card marketers offering all sorts of freebies to get freshmen and
returning students to sign up for their cards. No matter what come-on is being
hawked – be it a t-shirt, Frisbee, baseball cap, free pizza, subs or candy,
beach chairs, iTunes or phone cards – students would be wise to compare the
actual credit card deals before they apply.
Here are a couple that I think are excellent choices for college
students who can be trusted to manage their money:
- The Citi
Platinum Select Card for College Students comes with a 0% APR for 6 months on purchases, cash
advances, and balance transfers. There’s no annual fee, zero liability
for unauthorized charges, with typical online management tools and information about credit. However, students should be forewarned: The credit is not free! There’s the typical 3% fee on cash advances
and balance transfers, so it’s not as though getting cash or transferring
balances is without cost - although the lesson of transferring a balance and then paying it off at 0%
over six months would be worth a lot more than what's taught in most college classes, imho.
Students who can charge wisely can use this card to pay for books and their initial
living expenses, but still have a little time to pay off the bill. They better!
After the 6 months are over, the rates on purchases and balance transfers goes
to 12.99%,* which is a low rate for student cards, but the cash advance rate
climbs to 19.99%. If they pay late, go over the credit limit, or bounce a check they send in for payment, the interest rates all go up to 28.99%.
Tip: As I was
finishing off this blog, I clicked to close the Citi application and got a
message that said, “WAIT BEFORE YOU GO … complete an application and get a $50
statement credit.” Now that’s a valuable freebie!
- Commuting college students may really benefit from the Discover Student Open Road Card,
which offers a generous 5% rebate on the
first $100 in gas and car maintenance that is charged in each billing
period -
plus a 0% introductory rate on purchases for six months. After the six
months,
the rate goes up to 14.99%.
In case they do end up carrying a balance,
I generally prefer to see students get the lowest rates
possible. Still, this card's rate is fairly typical for college cards,
even at two points higher than the Citi card, and the 5% cash
back can sure help with fuel costs. Of course, carrying a balance at
14.99%
wipes out the benefit of the 5% cash back on gas. Students need to
understand
this before they start charging.
Discover also offers
rebates of up to 1% on other purchases, which are redeemable in amounts as low
as $20. There’s no annual fee, 0% fraud liability, average fees, and if the
bills are paid on time, this student credit card will help build a positive
credit history, even if someone’s credit standing right now might be described
as only good or fair.
A Card College Students Should Avoid Like the Plague
It's the MasterCard
from the University of Michigan Alumni Association, which boasts, “We’ve crammed
for you. Get a backpack full of benefits with this credit card.” Read a little
further and you’ll see that the advertised the benefits are nothing of the sort. Instead, they’re typical features
of all student cards: No annual fee or fraud liability,
24-hour customer service, and online management
tools and credit education.
There is no
introductory rate for purchases or cash advances, and the introductory rate on
balance transfers is 4.99% for six months. The interest rate on purchases will
either be 9.9% or 15.99% -- “based on your creditworthiness.” In other
words, the alumni are more likely to get 9.9%, while the students get 15.99%,
three full points higher than the Citi card, which is not affiliated with any
school.
You might think that cards affiliated with a
university would offer far more favorable terms, that the schools and alumni
associations would do whatever they could to negotiate excellent deals for their
students, as well as for themselves. I’m very sorry to say that you’d be wrong.
As Jessica
Silver-Greenberg and Ben
Elgin detail in their excellent BusinessWeek article, “The
Credit Card Hustle,” multi-million dollar deals abound, with few benefits
to students. For example, the University of Michigan Alumni Association’s
contract with Bank of America means “the group gets 0.5% of purchases made on
school-branded cards. In addition, the organization receives $6 a year for
every active student account, vs. $5 for each alumnus account. The deal
guarantees the Michigan alumni association $25.5 million over 11 years.”
If you’re wondering where the universities fit in, sometimes they get money, and as the
authors report, “Schools usually approve the contracts and provide access to
student information such as e-mail addresses and phone numbers. Some schools
also allow on-campus hawking of credit cards through T-shirt giveaways, phone
campaigns, and in-store promotions.”
The bank and the alumni association make out just fine, but
at what cost? Instead of offering the best deal out there, they’re taking
advantage of the students who should say NO! to deals like this and instead,
choose credit cards that truly offer them benefits. For more info on how
students are being taken advantage of by their univestities and its alumni, read “Selling
Students into Credit Card Debt.”
Cart Before the Horse?
If the college students in your life might need some credit
education, I suggest that these three articles be required reading … before any
credit card applications are submitted:
- How
Credit Works
- Credit
Card 101 for College Freshmen
- How My Credit
Usage In College Impacted Me After Graduation
With a little know-how and a fair amount of self-control,
college students can take advantage of some great credit card offers – better
than what many of the rest of us can get! Issuers want to be the first one in a
student’s wallet, in the hope of a long and prosperous financial relationship .. and parents who will bail them out if they mess up.
As
far as many of us older folks, there’s more of a credit history … and more
reason for them to be cautious. But if you always pay you bills on time, winnow your debt down as low as possible – to
10% of your available credit, ideally – and take some other steps to improve
your credit score, you, too, will get great offers,
just like the college kids!
*All rates are as of
today.
Nancy Castleman – Co-author of
"Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent
the last 24 years teaching people how to get out of debt, save money, and live
better on less. She writes on all these subjects for CreditBloggers.com.
Emily Davidson – Credit.com's Financial Expert and former TransUnion credit insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.