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How to be credit card savvy
Jennifer Wheat, a graduate of the University of Maryland, knows all too well the allure—and pitfalls—of having a credit card. Jennifer is a smart girl with a good head on her shoulders. But she quickly got into trouble when she used credit cards to enter a world of instant gratification. Retailers were only too happy to exchange her sliver of plastic for items that cluttered her apartment and dressed her in the latest fashions.
Jennifer’s debt snowballed faster than she realized, until she was barely able to pay the minimum monthly payment. Hooked, she kept charging. It took her some time to understand how interest works against borrowers. “You just don’t realize the impact of the interest rates,” Jennifer says. “You’re not thinking about how it’s building.”
Credittalk.com, an online site designed to help students become financially savvy, offers the harsh reality of credit card debt: It can take eight years to pay back a credit balance of $1,000 if you make only the monthly minimum payment. Jennifer is not alone; 83 percent of undergraduate college students carry credit cards. And like her, 47 percent of students carry four or more credit cards, according to a study by Nellie Mae.
Six percent of students carry balances in excess of $7,000. Getting married often doubles that burden. Adding in her husband’s previous charges, Jennifer realized they owed $8,000. Panicking, they consolidated their debt on a card with a lower interest rate and paid it off. They now use an American Express card for convenience. “Amex forces us to pay the entire monthly balance,” she explains. “I live in fear that, given the opportunity, I would charge up again.”
Jennifer suggests that students decline credit cards, unless you can pay off the full balance each month. “And don’t think that you can wait until you graduate to pay it off,” she adds. Creditors wait for no one. Their motivation in loaning money is to make a profit from the interest accumulated on unpaid balances.
How to make credit work for you
To establish good credit, you must live within your means. Setting a budget and not wavering is key. Yet one of the benefits of a credit card is having a safety net for true emergencies.
Shop around for a card that has the lowest interest rate, should there be an occasional month when you can’t pay off the full monthly balance. Interest is calculated daily, so mail your payment as quickly as the bill arrives to keep your fees small.
Credit cards with reward programs often charge annual fees and higher interest rates. If you’re concerned with carrying an occasional balance, avoid these programs.
Credittalk.com suggests these handy tips:
Always use the pre-addressed envelope enclosed with the credit card statement to mail your payment or face a possible delay in processing.
Inform your card issuer if you move to avoid missing a billing cycle. A good lead time is three weeks. Your goal is to retain a good credit rating. If you fall behind in payments or stop payments entirely, you’ll find it difficult to get approval for an apartment or to purchase a house or car.
Some employers are even taking note, demanding access to a prospective employee’s credit report before extending a job offer.
How to “erase” bad credit
Unfortunately, late payments can stay on your credit report for seven years. There is no magic wand that instantly erases bad credit, although infomercials make grandiose promises saying as much. But there are positive steps you can take to regain firm financial footing.
The first is to call your credit card company if you can’t make a payment. Usually you can work out a payment arrangement. Or seek the advice and support of your parents.
You might also consolidate your debt with a creditor offering a lower interest rate. If you have a delinquent account that you hope will just fade away (it won’t), bring it up to “current” status by making payments. Pay at least the minimum monthly balance due until you can pay it off in full.
Be smart with credit solicitations
Lenders are getting ever craftier in getting students to open credit accounts. Sometimes it’s through a free giveaway.
Amy Barone, a senior at Villanova University, didn’t realize that by signing a form accompanying a goodie bag that she had agreed to a subscription to Time magazine. For nearly a year, she received mailings from a bank, which she assumed was a credit card application that she didn’t want. Curiosity finally compelled her to open the envelope, and she discovered her delinquent magazine account. It was a nightmare to fix.
Amy has learned never to give out her mother’s maiden name or her social security number without good reason. “And never accept free stuff without suspicion,” she adds.
Card offers via the mail have reached avalanche proportions. Many college students fail to properly dispose of these offers, which arrive on a weekly or daily basis, says a survey by cardweb.com. Nearly 30 percent of students simply toss them instead of shredding them. Don’t make it easy for someone to open an account in your name and abuse your credit rating.
Simply cutting up a credit card doesn’t close an existing account. Cancel any unused cards with the lender. Open accounts will count as possible avenues of credit and could prevent you from getting additional credit that you want and need. Article provided by 
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