I have a confession: In the past few months I have—without telling you—thrown away at least a dozen credit card offers to you. this bombardment will continue when you move to campus. Why do credit card companies want to hook you before you have income? They're in it for the long term. Issuers know that people tend to be loyal to their first credit card; get it in college and you're likely to still be using it years later. So they will not stop the barrage, and even without me as your guardian filter, I hope you'll keep throwing the offers away. You need only one—a Visa, a MasterCard or an American Express. Later, when you've proved you can manage one card, I want you to add two others—a department store card and a gas card—to help build a good credit rating. In each case, never charge more than 30 percent of your credit limit and pay in full every month. But just to be safe, authorize an appropriate automatic monthly payment to protect you from late fees and a credit blemish.
You don't yet appreciate how important a good credit history is. When you graduate, your credit rating will be looked at by landlords, utility companies, cell phone providers, banks (if you buy or lease a car) and even employers. "The worst thing you can do is miss a payment," says Ellen Cannon, managing editor of BankRate.com. "That will damage your credit score, which is the basis of your financial life." Look for a low-rate student card with no annual fees, like CitimtvU Platinum Select Visa for College Students (0 percent interest for six months; 13.99 percent thereafter) or Blue Cash from American Express (0 percent interest for the first six months; then 8.99 percent to 15.99 percent depending on your credit history; and a cashback feature for purchases). I don't often get excited by a 0 percent introductory rate. But in this case it's a nice feature. You may charge more than you expect initially buying books and setting up your dorm room—and have to carry a balance for a month or two.
This article originally appeared in the September 2008 issue of Money magazine.
Published on October 22, 2008