Credit cards used to flood campuses at the start of the school year with booths that offered free T-shirts, hats and other giveaways in an effort to sign-up new customers.
But the Credit Card Accountability, Responsibility and Disclosure Act put an end to that this year.
Credit cards can no longer offer free stuff if they’re soliciting customers on campus. Applicants between 18 and 21 must also prove they earn enough money to pay the bill or get mom and dad to cosign the agreement.
The act is trying to curb credit card debt among college-age consumers, which has increased in recent years.
A whopping 82% of college students don’t pay off their balances each month, according to a 2009 biennial study by Sallie Mae, the big student loan company.
As a result, graduating seniors now begin their careers with an average of $4,100 in credit card debt, up from $2,900 in 2004.
That’s why it’s important for college students to shop around for a credit card that offers these three things:
No monthly or annual fees. There’s no reason to pay $39 to $69 a year or more to carry a credit card.
Free online access to your account. To avoid big surprises when the monthly statement arrives, you need to be able to track how much you’re spending and what you’re spending it on.
Reasonable interest rates. Don’t be suckered into a credit card based on the introductory or teaser rate that’s only in effect for the first few months.
The regular rate on most of the cards you’ll be offered will be variable.
Look for one that charges the prime rate — the rate banks charge their best commercial customers — plus a premium of anywhere from 5.99% to 12.99%.
With the prime at 3.25%, that means you’re looking for a card that currently charges 9.24% APR to 16.24% APR.
Avoid credit cards with your school’s mascot or logo.
Colleges make a lot of money by licensing their name to credit card companies, who then market the cards to students and alumni. Unfortunately, they often come with shockingly poor terms.
Another perk to ignore: Elaborate reward programs.
Getting something for nothing always sounds great.
But realistically, as a college student you won’t be spending enough to earn all of the the miles or points needed for the free trips or electronics you see in the ads.