It can get exciting when you’re applying for your first credit card, especially when you’re going to college. This is a sign that you’re growing into adulthood and it’s getting you one step closer to building your credit score. Like anything, everything has its advantages and disadvantages.
Low credit limit
When you’re applying for your first credit card, you’ll start to realize that most credit cards are going to give you a very low credit limit. This credit limit is usually going to range anywhere from five hundred dollars to about one thousand dollars. The reason they do this is because you have no credit history yet and you haven’t proven yourself to the lenders.
Let’s take a real life example for instance. Let’s say you have you two people sitting in front of you that want to borrow your money. One person is your best friend and the other is a complete stranger. Now put take this same scenario and think of it from a lender’s perspective. You are going to trust the person that you’ve known for a longer time. As you build your credit, you will slowly notice that you credit limit will increase. To better your odds after you establish your credit, apply for another credit card that isn’t student related and you should get a higher credit limit with your new credit account.
High APR rates
Like the low credit limit, as a student, you’re going to experience high APR rates. Once again, this is because you’re not established in the credit industry. Because of this, you’re going to experience higher APR rates that range anywhere from 16% and beyond depending on the credit card. Just keep in mind that if you pay off your bill in full, you will not have to worry about your APR rate.
Like the credit limit, your APR rate will improve over time depending on your credit score. If you establish great credit, you’re going to have a lower APR rate. After about two or three years of establishing credit, you can usually contact the credit companies and negotiate your APR rate. A lot of the times if your credit card company doesn’t budge on your APR rate, shop elsewhere to see if you can get a lower rate.
Bait and switch
This is the main thing you need to look out for. With credit cards, you already know you need to read the fine print. The nice thing about applying online is that you’re able to read all of the terms before you actually apply. When you apply on the campus, a lot of the times the reps like to rush you through the process so that you can’t read all of the print.
The biggest trick they like to pull is to make the credit card look like the platinum card but what they don’t tell you are that if you’re not approved for the platinum, you’ll be given the second tier card which has higher rates and ridiculous fees. It’s extremely important that you read the fine print before you apply for your credit card.
These are just a few disadvantages that come with a student credit card. Now, the advantages far outweigh the disadvantages but like anything, you should be fully aware of both the good and the bad. The most important thing to remember is that you read the fine print and you’re responsible. If you follow these golden rules, you’ll be on the right path.