Putting Lipstick on a Pig  
 

What's on your mind now that you're on campus?  Probably not credit scores.  Getting your first credit card is fun.  It's kind of an easy ticket for life.  But a trip to the bookstore, three to Chipotle and eight trips to Target later, and you're in over your head.

The Big Tip

Credit cards are THE way to establish credit for students.  Good credit is even more important than a good GPA.  Let's be real, the mortgage officer doesn't care if you graduated magna cum laude (although we're highly impressed).  Here's the big tip...get ready:  Pay off your balance every month.

[Gasp!]  Imagine, a lender saying "don't pay interest"!  That's right.  You're a student.  It's better to build good credit at this point.  Pay off your balance every month...on time, dude...and you'll never pay interest.  The side effect is you'll have outstanding credit to get that first apartment, lower car insurance or even a job!

 

The Secret Code

Have you ever wondered how they come up with your credit score?  Us too.  The formula is more cryptic than the Da Vinci Code.  The company who came up with it doesn't share the calculations with anyone, not even lenders.  No matter how you feel about the Da Vinci Code, a credit score is undisputedly real.  Here's what we know can affect you negatively:

  • Late payments

  • Missing payments

  • Opening too many credit cards/loans in a short period

  • Maxed out credit cards

  • Multiple credit cards

 

Dating a Pretty Pig

Here's where the pork comes in:  Ever been on a date with someone who was totally hot, but completely rude?  Welcome to the world of most student credit cards.  You can put lipstick on a pig, but it's still a stinky pig.  A lot of lenders will dress up their pig with cool designs and intro rates and send it out with free gifts.  Oink.

Here's what usually stinks about them:

  • Default or penalty rates -- rate goes up when you're late or the intro rate expires

  • Late fees -- even if you're late by ONE HOUR

  • Cash advance fees and rates -- when you get cash from the ATM, it's a higher rate than for purchases

  • Balance transfer fees and rates -- when you transfer a balance from another card, it's higher too

  • Variable rate -- can change monthly, which means it could go up

  • No or short grace periods -- how long you have to pay the full balance without being charged interest

 

Credit Card vs. Debit Card

Some students opt to use a debit card instead of a credit card.  That's fine, in fact, it's probably good to use a debit for pizza, day-to-day items, pizza, clothes or pizza.  Although both require responsible use (you can get into a different kind of trouble with a debit card), they're vastly different.  Check it out:

Credit Cards Debit Cards

It's a loan.

It's a plastic check.

Charges interest on purchases, cash advances and balance transfers.

No interest charged on anything.

Builds credit for your future.

Does not establish any credit history.

Max limit is based on your credit-worthiness.

Max limit is based on available checking balance.

Pay for purchases monthly.

Pay for purchases on the spot.

Sign for all purchases

Sign for purchases (this is best) or use your PIN

Not an ATM card, but can get cash advances at ATMs

Doubles as an ATM card (no interest charged for getting cash)

 

Who has questions?

So that's the Cliff's Notes© version.  If you've got deeper questions about credit cards or establishing credit, stop by our OSU branch at 11th and Neil.  If you need help repairing credit, get with our financial counselor by calling us at 614.487.6650.  All members get free sessions anytime.