How to Say No to Easy Credit

Just say no to easy credit!

Have you seen promotional stands on your campus offering hats, T-shirts, food, drinks or other goodies just for filling out a credit card application?

Think carefully before taking this bait, because it will get you on the hook--perhaps to the tune of thousands of dollars. And don't count on your school for support in this matter--it may be raking in millions of dollars in fees for allowing these hucksters to try to lure you into signing up with them.

Here is how to turn down credit that is just too easy.

Difficulty:

Moderately Challenging

Instructions

1. Read the booklet that comes with the application--carefully--before completing any credit card applications. Don't let the lure of free food or drinks tempt you into filling one of these out without knowing its terms. Ask the marketer in front of you about the rates that will kick in after the teaser rate expires. If she can't answer any of your questions, walk away immediately.

2. Take the time to thoroughly shop around for the best credit card deal. The ones being hawked on your campus probably have much higher rates than cards that could be just as available to you if you looked around. Bankrate.com (see Resources) indicates that the rates for college students can range anywhere from 10 to 23 percent, but the cards offered to college kids usually carry at least 3 to 4 percent more than other cards.

3. Think very carefully about what you need a credit card for. It is not a good idea at all to use credit cards to pay for beer, bar tabs, pizza and clothes each month, unless you can pay the balance off in full. Remember that you are young and will probably graduate with enough debt without having a sizable credit card balance to pay off as well.

4. Ask your student services department whether it will sell your contact information to credit card marketers. If so, be prepared to receive numerous phone calls, mailings and email messages offering credit card deals. Ask if you can have your name removed from these lists and block your email. You may need to contact your alumni association to do this; it is often the one who cuts these deals with the credit card companies.

5. Be wary of co-branded cards that have your school logo on them. Although this may seem like a show of school spirit, these cards often have much higher rates and fees than other cards. Regardless of what kind of card you use, be sure to make your monthly payments on time to avoid unnecessary service charges and late fees.

Tips & Warnings

• If you're not sure how much credit card debt you can carry, open an account on a website like Mint.com, where you can input all of your debts and assets and cash flow so that you can get a clear picture of your financial situation at all times. A good rule of thumb to remember is that your revolving debt payments should probably not exceed 25 percent of your disposable income (15 percent is a better number.)

• Remember the rule of 72: Divide 72 by your rate of interest, and the quotient is the number of years that it will take for your debt to double. If your credit card charges 12 percent interest, then it will take six years for your card balance to double. Therefore a $20,000 balance when you graduate could easily become twice that by the time you're 30 if you only make the minimum payments.

Resources

• Bankrate: Best Credit Card Offers