Student Credit Card and Credit Education Blog

So, you’ve missed a payment or two and your interest rate has increased. you could just suck it up and pay the increased amount. Or you do have another option - just ask them to lower it!

Generally, credit card companies want to do you favors. This is particularly true, when you’ve accumulated a balance and are making them money. Therefore, if you ask them to lower your interest rate from, say, 17%, they shouldn’t have a problem dropping it a few points, or at least check to see if they can. It’s a tactic that many don’t know about because they just assume that the rate is the rate. In reality, credit card companies have a great deal of control over what they charge, and should be willing to work with you to keep you as a customer.

Additionally, let’s say you make a late payment and it’s your first one. Again, give them a call to see if they can drop the late fee. If you are good about making your payments and rarely have this a situation, they’ll most likely cut you a break. And even if you are regularly tardy, the worst they can say is, “No.”

Paying off your credit card each month is tough, particularly for college students. So, if you have trouble making payments or keeping your balance low, use your phone and good manners to keep your APR as low as possible.

Per Yahoo! Finance, I was reading how credit card default rates have been increasing. The reason for this, the article discusses, is most likely due to the rise in mortgage rates.

Who is this affecting? Those who have had their mortgage rates increase over the past year or so, as the rates have risen on their adjustable rate mortgages (see below for more info). Because they’ve had trouble paying their mortgage, they’ve established credit card debt and ultimately couldn’t pay the bill, so they had to forfeit their debt, have their house foreclosed, and possibly file for bankruptcy. Following this process can severely knock your credit score to a much lower number.

This is an unfortunate result of those who did not prepare for the eventual increase in mortgage rates. Hopefully, with all the problems that these lenders are having, the next housing boom won’t end with people losing both their homes and credit scores. Thankfully, this isn’t something that affects college students, so feel free to continue your pursuit for a student credit card.

More info on the different mortgage rates: ARM vs. Fixed Rate

When most people think of perks from credit cards, they usually reply with, “frequent flyer miles.” These are the ubiquitous bonuses of frequent credit card use and can ultimately provide free trips and upgrades. Certainly, something worth pursuing, right? Well, not necessarily.

The problem with most of these cards is the annual fee, which I’ve talked about before. This amount (which ranges from $40 to $100) can offset any miles you receive, unless your company covers this cost and you are flying on a regular basis. These cards are also usually for one airline, so if you fly somewhere that Continental or Delta doesn’t normally go, you may miss out on some serious credit card miles.

One card we offer avoids this issue as well as the annual fee. The Capital One No Hassle Premium Rewards Card is a unique specimen in that it offers miles for all airlines and the rewards can be used whenever you want. The latter is a bonus because most mileage programs have restrictions as to when you can fly, so you are usually restricted during very hot times, like Thanksgiving, Labor Day and Christmas. This card doesn’t concern you with that. Finally, the card doesn’t work with any present miles you may have through other programs, so it’s better for those who are just starting out.

I haven’t seen it personally but I’ll bet my right pinky that my title has been thrown around thousands of times in advertising mockups and meetings. So here’s number 5,001! Anyway, the rewards program through Discover has some very unique offers that should ignite your interest in this card as well as cause you to become a more frequent user.

The way their rewards programs works (for the Discover Student Card, as an example), is you’re provided a series of services that you’ll receive 5% back on four times a year. So, maybe from January to March it will be travel (airfare and vacations). Then in April-June, it’ll change to consumer electronics (TVs and DVD players). We used the card during the “travel quarter” and received 5% back on a $650 trip, which was quite nice! This card also offers up to 1% on all other purchases, which is good, but not as strong as some of the other cards that have higher rewards for gas and groceries all year, like the Chase Freedom or Citibank Dividend Platinum Select.

Using a Discover Student Card everyday may not be as valuable as others, but it is an excellent one to have when the months of 5% rewards coincides with a purchase you want to make.

Instead of applying for a typical credit card, in which you receive a monthly bill that reports everything you’ve purchased over the last 30 days, there’s another option that allows you to pack the plastic. Enter: prepaid credit cards. These are similar to gift cards you purchase at retail stores. They begin with a set amount, and deplete as they’re used. They can be refilled by contacting the provider via phone or electronic means.

It’s definitely a good way for younger students and teens to get started with credit cards. Even though they don’t get the true experience of racking up large bills, they still have the opportunity to own a card and use it at their local store. For some who don’t have the discipline or maturity to use a regular credit card with the appropriate responsibly, it can be a better step. Avoiding the chance to get into debt is a good thing, particularly for those who don’t understand the consequences.

Alternatively, if you’ve had credit cards for years and have had trouble with large balances or poor credit, these cards provide you with the chance to carry larger amounts of money on plastic and hopefully pay off your old balances.

If you decide to apply for a credit card which happens to be your first, you most likely have a low or non-existent credit score. Therefore, in order for credit card companies to feel more comfortable with you spending their money, they may require a more qualified credit holder to co-sign for this card. What does this mean? Simple - if the primary card holder defaults on paying back balances, not only is their credit score hurt, but the co-signer’s is as well. But, if you need one, what should you do?

Ask first!
Don’t just put your roommate’s name down without asking him/her! Of course, you intend to pay the card balance back each month, but things happen and that balance may carry over. If your roomie decides to check their credit report, and finds it slightly damaged from your excessive spending, they might get more than a little upset!

Parents are good bets
Provided they have strong credit, try mom or dad. They should be more than willing to help you out, and you might be a bit more wary about overspending since you’re riding on their credit line as well as yours.

Want more details on co-signers for credit cards as well as for student loans.

To go along with my discussion about auto insurance, I thought I’d offer some tips for buying your new Bentley or Ferrari.

• Do you need a car? - Cars are expensive. Putting aside just buying it, you’ve got insurance, gas, maintenance, and parking. The costs can add up quickly so unless it is truly necessary to have one, you may simply want to tap into local public transportation.
• Check the gas mileage - SUVs are quite popular, but they can eat up quite a bit of gas. If you need something that has a lot of storage, try a station wagon. Subaru makes a number of good ones and they are all All-Wheel Drive, which is much safer in nasty weather.
• Think “used” - As I’m sure you know, cars depreciate as soon as their driven off the lot. This is why a certified used car, demo, or last year’s model can be the way to go. You’ll save thousands, and the car may only have a few thousand miles.
• Reliability is key - Japanese cars are more reliable than European and American cars. This is a fairly broad generalization, but if you take a look at Consumer Reports, you’ll find that this is usually the case. Therefore, Toyota, Honda, and Nissan products should all be at the top of your list of cars to look at. Other less popular (but still reliable) manufacturers include Mazda, Mitsubishi, and Subaru. Check out Edmunds.com, Cars.com, or Carsdirect.com to research further.
• Lease or buy? - A frequent question. If your plan is to move to an urban environment in a few years, but a car is necessary now, then leasing may make sense. Also, if you only like to keep cars for short periods of time, a lease will alleviate the potential hassle of selling your car when you want to give it up.
• Careful with financing - Unless they have a special rate, avoid using the dealership for financing. You can almost always get a better rate through a local bank, credit union or AAA. Have the financing in hand before you start the negotiations.

Heed these words of car buying wisdom and make a well-researched, intelligent car buying decision!

With the recent jump in gas prices and the ever-increasing cost of buying a car, everyone is looking for ways to watch their automobile spending. One way is certainly to use a rewards credit card for gas, but also be careful with your car insurance costs. You may be spending more than you need to.

• Shop around - This seems to be the first tip for any purchase. Different companies provide different pricing. Try some of the bigger companies like Geico or Progressive and then maybe check with some local shops. If they want to charge you for a quote, just go somewhere else.
• Watch your deductible - A deductible is the amount of money you will have to pay out of pocket before your insurance kicks in. The higher the deductible, the lower your rate. I think $1,000 is a good number to set it at. It’s rare that you’ll have an accident, and the additional cost of the deductible should offset the decrease in your annual rate, due to the infrequency of when you’ll actually have to call your insurance agent. When I changed my deductible from $1,000 to $500, it dropped my annual rate over $100.
• Remove unnecessary perks - You can certainly add additional bonuses like free towing and rental cars. However, take a look at your situation. Unless you need the car to get to work/class each day, the rental car probably isn’t worth it. Once I had the option of taking public transportation to work, I canceled the rental car section. Your agent should be able to help you decide which areas are optional for you.

Try and save yourself a few dollars by reviewing your auto policy. Here are a few additional sources of info to get a firmer grasp of what you pay for each year:
Edmunds.com Insurance Guide
Cars.com Advice

Via Laura Rowley’s article on Yahoo!, she reviews reasons why she believes teenagers should begin their financial lives with a credit card. She makes some good points, of which I agree with. These include the following:

Two-thirds of students would rather learn about personal finance through experience rather than the classroom - Most people enjoy learning by doing. A friend of mine who worked for a large consulting firm once told me that the firm prefers employees to stay working rather than seek graduate degrees, because work experience has been far more valuable.

Prepaid cards are a good start - By instituting the use of one of these, teens will begin to understand the use of plastic but not have the responsibilities of regular card. Just watch out for extraneous fees, such as per-minute customer service and have ATM fees. Interested in one of these? Start here!

Lead by example - Your teenagers will much more likely follow good practices of charging (i.e., avoid big bills, pay it off each month, etc.) as long as they have strong financial role models at home. So, if you have young ones who just received their first card, make sure you use it well.

Teens are some of the biggest spenders in the country and generally prefer plastic over paper. Just make sure they do it intelligently.