Good Credit 101

Shaz Jumaralli was only four months into her sophomore year of college, but she had already accumulated $3,500 in credit card debt. At first, having a credit card seemed reasonable, even necessary, for the 19-year-old student. She had planned to use it to pay for meals until the university meal plan kicked in each semester. But Jumaralli’s good intentions went awry once she had that “plastic” in hand. Jumaralli ended up working two jobs to pay off the debt.

Admirably, Jumaralli cleared up her balance while still in school. Many students, however, end up graduating with inordinate credit card debt on top of student loan burden. Financial experts caution that college students in particular must understand that credit cards are not “free money,” and that every time they charge an item, they are in fact receiving a very expensive loan.

Before filling out a credit card application, every college student should take advantage of personal finance workshops on campus or nearby. Books such as Sanyika Calloway Boyce’s Crack Da Code: What Every College Student Needs to Know About Money, Love & the Dream Job (Smart Concept Books Publishing; $14.95 and Websites such as can also help build knowledge.

When Jumaralli began shopping for her card, she did do a lot of things right. She checked to see if annual percentage rates were fixed or variable. She also checked the default rate — the rate customers pay if they miss a payment.

Understanding the basics of money and credit management is a must before obtaining a credit card. Here’s what you need to know before filling out a card application or accepting a pre-approved offer:

The interest rate: Although students often qualify only for student credit cards, which traditionally have higher interest rates, they should still shop around for the best deal. According to, low-interest-rate cards currently carry APRs below 14%.

The introductory rate period: That initial low rate could expire in mere months. Know the jump rate — the rate the card will jump to after the introductory rate expires.

The default rate: Credit card interest rates can often skyrocket because of even one late payment. Jumaralli’s credit card had a fixed APR of 9.99% but shot up to 23.99% when she missed payments.

The annual fee: Students should choose a card with no annual fee.

The credit limit: Cards with low limits — no more than $1,000 — help students avoid the temptation of overspending. Keep the limit low by not accepting periodic limit increases.

Consequences can be grave for college students who can’t control their spending. Bad credit can affect the ability to obtain a loan, apartment rental, or job. More and more companies run credit checks on prospective employees. To graduate from college with little or no credit card debt and an excellent credit history, MetLife financial planner Robin Vetere suggests charging only necessities, such as school supplies and books, not clothes, bar tabs, vacations, or other discretionary purchases. Also crucial is paying the bill in full and on time every month.