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What You Need to Know about Getting Your First Credit Card

Posted on by christyne

For students trying to build credit, credit cards can be a great option, but some risks come along with them that you need to be aware of.

The Credit Card Act of 2009 requires those under 21 to either have proof of income, or an adult cosigner in order to have a credit card. For many college students who have very little income or are under 21, this can leave you with few credit card options.

If you have enough income or can get a cosigner, which could be a parent or family member, a student credit card could be a good option for you.  Many student credit cards have no annuals fees, have reasonable interest rates, and offer rewards, such as cashback. Some credit card companies will even provide you with your credit score, which can be a great perk if you are trying to build credit. Many credit card companies also have apps for your phone that can help you track your spending and pay your bills. Most student credit cards have interest rates between 11.15% and 21.99%. Another option could be a credit card offered by your bank or credit union. Be aware of the interest rate, late fees, and any other fees for any credit card that you apply for. Always research any credit card that you are thinking about before you apply.

If you are not approved for a credit card, or have bad credit, there is another option: you can apply for a secured credit card. A secured credit card is for those who want to build or rebuild their credit. For a secured card, you are required to deposit money into a savings account to be used as collateral if you are late with your payments, and that deposit will then become your credit limit. A secured card works just like a credit card, and you will have monthly payments and be charged interest if you do not pay off your balance. Secured cards usually have an annual fee, and usually do not have the same benefits as many other credit cards. However, secured cards may be the only option to build credit for some.

Just remember that if you are not paying your balance in full every month for any credit card, you will be accruing interest, which will add up over time.

Tips:

  • If possible, pay your balance in full every month to avoid the costs of interest.
  • At least make the minimum monthly payment.
  • Always pay on time.  Late payments stay on your credit report and score for 7 years.
  • Never exceed your credit limit and try to stay between 1-30% of your limit.
  • Use credit sparingly.
  • Explore your options before applying for a credit card on a website such as http://www.nerdwallet.com/ or http://www.bankrate.com/
  • Always read all terms and conditions before you apply for a credit card.

Sources:
https://www.creditcardinsider.com/credit-cards/student/
https://www.creditcardinsider.com/credit-cards/secured/
http://campusgrotto.com/credit-card-act-new-rules-for-student-credit-cards.html

Heidi Hilton
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Your Credit Score: the 3-Digit Number

Posted on by kdarnell

A 3-digit number affects your financial life significantly. This number is called a credit score. A credit score shows your creditworthiness, and it also indicates the possibility that you will not pay your bills. Different lenders use different scoring formulas to create credit scores, so your score can vary from lender to lender. Most scores range from 300 – 850, but you should have a credit score goal of at least 700.

A good credit score brings you several benefits. Some of the benefits include:
• Low interest rate on credit cards and loans. Interest is charged when you borrow money, and so the interest rate is tied to the cost of loans. With a high credit score, you will be qualified for the best interest rate.
• Higher chance to get loans and credit cards approved.
• Get higher credit limits.
• Better auto insurance rate.

Some tips to achieve and maintain a good credit score include:
• Pay your bills on time. One way to do this is to set up automatic payments at creditors’ websites or from your bank’s website. Pay more than the minimum payment if you have the ability to do so.
• Don’t get too close to your credit limit. If you use too much of your total credit line, you will hurt your credit score. Keep your credit utilization ratio less than 30%.
• Don’t apply for too many credit accounts in a short time, otherwise it will affect your credit score negatively.
• The longer the credit history, the better. The longer time you have credit in your name, the more experienced you are, and the more information creditors have to determine whether you can take care of your finances.
• Get your free credit report every year. You can get three credit reports each year at www.annualcreditreport.com . It is necessary for you to read through your credit report to ensure your information is correct and to verify that you have not been a victim of identity theft.

When you have a low or nonexistent credit score, you will get higher interest rates on loans if you are approved, which are more costly in the long run. When you apply for jobs, many companies perform background checks as a part of the interview process and they are going to check your credit. Some companies also check your credit history when you are considered for promotions.

To check your credit score for free go to www.creditkarma.com. If you would like to meet with a financial counselor to discuss your credit report or score, simply request a free and confidential appointment at www.ksu.edu/pfc.

Lei Cao
Peer Counselor I
Powercat Financial Counseling
www.ksu.edu/pfc

Credit-bility

Posted on by kdarnell

Credit is an important part of your financial history. Whether you are interested in purchasing a car, a home, or even applying for a job, credit can either work for you or against you. Many people know that it is important to have good credit, but they aren’t exactly sure how to start establishing it.
Here is some general information that will be helpful as you strive to build good credit.

There are two ways in which your credit is measured- a credit report and a credit score:

Credit Report: There are 3 credit bureaus (Experian, Equifax, and TransUnion) in existence, which track your information regarding your credit. Institutions such as banks, credit card companies, your student loan servicer, etc., will send information to credit bureaus (not necessarily all of them) regarding your payment history, how much you borrowed, the number of credit accounts you have, and more. All of this information (good and bad), including a lot of your personal information, is on this report. A free annual copy of each report can be obtained at https://www.annualcreditreport.com/cra/index.jsp

Credit Score: The credit bureaus assign you a score ranging from 350-850, with 350 being terrible and 850 being excellent. A free estimation of your credit score can be obtained at https://www.creditkarma.com

Now for a misconception: Many people think that if they get the utilities in their name, having a cell phone contract or similar things helps build your credit. Unfortunately, those things do NOT help you establish credit. The only time that these items will make a difference (in building credit) is if your accounts go into collections; that will severely hurt your score and put a major blemish on your report.

I am not saying that having utilities in your name won’t be of any help to you, because it can. Businesses, property management groups, or banks will often ask for credit references. If you have been a trustworthy customer, you should have a strong list of credit references to offer.

Here are some easy ways to build credit while in college:

1) Getting a credit card and using it to make small regular purchases and paying it off entirely each month. Essentially treating it like a debit card. WARNING: If a credit card is used improperly or impulsively (exceeding your balance or missing payments) you will end up doing the opposite of what you set out to do.

2) Taking out a small loan at a bank. Loans of various sizes are available at banks and you could take out a loan, simply hold on to it, then repay it when it’s due (principle and interest).

Remember that a good credit history takes time to build and the sooner you get started the better.

Good luck!

Sam Honey
Peer Financial Counselor II
Powercat Financial Counseling
www.ksu.edu/pfc

There’s an App for That!

Posted on by roxanne

Between homework, quizzes, papers and exams, many students find that they don’t have much time left in their days to keep their finances organized. However, many apps are now available to help you keep track of your financial situation, without the hassle! Check out this list of apps that can help you out:

Mint.com (Free on Android, iPhone, and on the web) – Mint.com is a free, easy-to-use personal budgeting application. With Mint, users can monitor their online bank accounts and track their spending. Signing up at mint.com takes about 5 minutes and users can set up a budget, make goals, and track their progress. Mint is safe and secure and very user friendly. It has been named the Best Finance App by the 1st Annual App Awards.

Credit Karma (Free on iPhone) – Credit Karma provides free credit scores and free credit monitoring. With the Credit Karma app, you can check your credit score for free, from anywhere. There is no subscription or credit card required. Credit Karma will also alert you when something important changes in your credit report. This is a great way to protect yourself against identity theft. This app is currently only available for iPhones.

Pageonce (Free on Android and iPhone) –  Pageonce is a bill payment app that allows users to pay their bills from anywhere at any time. All of your account balances are readily available in one place for your convenience. Pageonce will also send reminders and alerts so you don’t miss a payment. Users can also track their frequent flyer miles, rewards, mobile minutes, and text and data usage.

Lemon Wallet (Free on Android, iPhone, and Windows Phone) – Lemon Wallet is an app that lets you store a digital copy of all the cards in your wallet on your phone.  This allows you to have a digital backup of everything in your wallet in case it is ever stolen, lost or misplaced. Lemon Wallet also provides a “Lost Wallet Service” that will provide you with an agent to help you with the process of cancelling your payment cards if your wallet is lost. All data entered into Lemon Wallet is encrypted and a PIN is required to access your cards. Also, you can remotely unlink the app from your Lemon account if you ever lose your phone.

 

Jamie Engelken
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Teaser Trouble

Posted on by roxanne

Have you recently received an offer for a credit card in your mail? Did the offer promise incredibly low interest rates, maybe even zero percent? That sounds like a great deal! However, remember that if something sounds too good to be true, it often is. The credit card companies are in the business of making money. So make sure to read the fine print before you make a decision.

Teaser rates, also known as introductory rates, are low interest rates that a lender charges you for a few months, or sometimes even up to a year, in the hopes of getting you to apply for and use their credit card. After the introductory-rate time period expires, the balance on your new card will be subject to a much higher interest rate.

Here are some credit card tips you should keep in mind:

  1. Typically the teaser rate will only last a few months, and occasionally up to a year. Before signing up for any card with a low rate, read the fine print to find out what the standard rate will be once the teaser rate period is up. These offers almost never clearly promote the standard rate, so you’ll probably have to look through the full terms to find out. Look for the APR rate, which is a standardized way of comparing yearly credit card interest rates.
  2. The credit card companies do not have to, and most likely will not notify you when the introductory rate expires. Be aware of this date if you intend to carry an outstanding balance on your card, because after this date your balance will be subject to the standard (higher) interest rate.
  3. Many individuals apply for cards with teaser rates so that they can transfer a balance from a higher interest rate credit card and, hopefully, reduce the amount of interest they are paying. However, when the intro period expires on the new card, they often find themselves right back where they started, paying a high interest rate because they couldn’t pay the balance in full.
  4. Consider the impact of repeatedly tapping promotional offers on your credit score. Too many open lines of credit, as well as too many recently opened accounts, can lower your credit score. The same can happen if you often close old accounts and open new ones to take advantage of promotional offers.
  5. If you would like to stop receiving unsolicited credit card offers in your mail, you are in luck! You can do so by following the link below to the Federal Trade Commission’s website, and follow the outlined steps: http://www.consumer.ftc.gov/articles/0262-stopping-unsolicited-mail-phone-calls-and-email

Credit cards can be very helpful, especially for students that want to start building their credit score. However, make sure to carefully read the fine print of the credit card offers, and follow the above tips to make sure your credit score or your wallet don’t take a hit.

 

Tomaz Bogovic, Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc
powercatfinancial@k-state.edu
785-532-2889

 

Protect Yourself From Identity Theft: Top Ten Tips

Posted on by roxanne

Identity theft is a growing problem in our society today. In fact, throughout 2006, 8.4 million Americans were victims of identity theft.  Identity theft occurs when an individual’s personal information is stolen, allowing the thief to take on the identity of the individual to commit theft or fraud. In order for someone to steal another individual’s identity, they only need three key pieces of information: another individual’s full name, birthday, and social security number.  Therefore, these are three personal assets that all persons should work harder to protect, especially college students.

College students who fall into the age range of 18-24 years old are the most likely victims of identity theft. The reasons for this are that individuals in this age range are less likely to monitor their credit closely, use spyware, and shred documents that contain personal financial information. All of these mistakes are to the advantage of the thieves who use these common techniques to commit identity theft. These facts confirm that protecting one’s identity is more important now than ever. Therefore, listed below are the top ten ways you can be proactive in the fight against identity theft.

  1. Pay attention to your billing cycles. If you notice some of your mail is missing, this could be a red flag that you have been a victim of identity theft.
  2. Always shred important documents that contain information including: social security number, credit card account numbers, or bank account numbers.
  3. Guard your credit cards and other personal information by not carrying unnecessary identity information in a purse or wallet, i.e., your Social Security card.
  4. Do not use obvious passwords.
  5. Be aware of e-mail scams and never download files or click on links sent by strangers.
  6. Be sure to update your computer’s virus protection software regularly.
  7. Before getting rid of an old computer, destroy the hard drive and use a “wipe” software program.
  8. Review your credit card statements and telephone bills for unauthorized use. If you suspect fraud, call the company immediately.
  9. Order a credit report routinely using www.annualcreditreport.com.
  10.  If you’re a victim of identity theft, report the crime to the police immediately.

Identity theft can be prevented. Therefore, use these tips to stay proactive about protecting your identity. If you would like more information about identity theft, or help looking at your credit report, you can make an appointment with Powercat Financial Counseling at www.k-state.edu/pfc.

 

Anna Govert
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc