Credit cards and college students are kind of like Scotch whisky and a beer chaser at the frat party.
Not usually a good combination.
But students have to launch their credit sometime. A credit card is a good way to do that if the student is disciplined like "Andrew" of Ole Miss.
Andrew e-mailed me to say he's shopping cards to establish his credit, but he's a little dizzy from all the terms and conditions:
"Also, I looked at some of the credit cards, and they had something called a ‘Minimum Finance Charge.' What exactly is a minimum finance charge?"
A minimum finance charge is a fee that some credit cards slap on students whose balances are so small, interest can't be calculated. So instead, the card company adds a minimum finance charge. It's usually a small amount -- 50 cents to a few bucks -- but if you don't carry a balance, you don't get stuck with the charge.
Also, make sure you don't get stuck with these college credit card gotchas:
* "AFFINITY" CARDS. These are those cards with your school's logo, usually offered by your school as part of a contract with a local bank or the alumni association. These cards often carry heavy penalties designed to snare students who bust their credit limits or miss a minimum payment. Some also have misleading introductory offers, like a low APR offer that applies only to balance transfers, not purchases. Read my Stand Your Ground story on the Ole Miss affinity card as it was offered in 2008: http://www.wmctv.com/Global/story.asp?S=8162921.
* 2-CYCLE BILLING. That is a single bill spread out over multiple months instead of one month. It's a trick to pile higher interest on students. The new credit law passed by Congress is supposed to outlaw 2-cycle billing, but some cards still pull this stunt.
* DEFAULT APR'S. Those are penalty interest rates for missing a payment or blowing your limit.
The new credit law also requires students under 21 to either have a parent or guardian co-sign for a card or prove by income that they can make the payments.
Lowcards.com of Birmingham, AL, has ranked the top seven credit cards for college students. Research them and study their terms here: http://www.lowcards.com/college-students-credit-cards.aspx.