Student Credit Card and Credit Education Blog

Have you heard the fuel forecast? Experts are predicting gas prices will rise above $5 per gallon by fall. If you’re like me and commute daily then you understand how the pain you feel at the pump is only going to increase and at the worst possible time for those going back to school. I started to think about this and wondered how students can counter this increase without somehow making more money.

I was reminded of this roommate I had after college named Jason. Jason was an accountant and I gave his quirky behavior around money and finance a mixed review. One of the things he always did was to pay for all his groceries, gas and other everyday expense with his credit card. He did it because it was easier to manage his money and he got some sort of rewards back.

Personally I thought that was a good idea in theory but that in reality using a credit card for regular expenses would make it harder to budget. For example it’s much easier to go over your grocery budget if you are using a credit card versus cash or a check. But then I thought about gas. Gas is different; you can only fill up your tank until it’s full so there’s no risk of overspending. A gas rewards credit card is actually a really good idea.

Gas rewards cards are just like regular credit cards except they pay you back a percentage of every dollar you spend at the pump. Typically they will give you 3% to 5% back as cash for every dollar spent which is the same thing as saving 12 to 20 cents per gallon. This can add up to $2 to $5 for each fill up. Multiply that by how many times you fill up each month and that’s the money you could be saving on fuel which you simply aren’t right now. You’re buying the gas anyway so if you can be responsible and save the cash you’d normally spend on gas this is an easy way to off set the increases.

The challenge for you is to be responsible and try to only use it for gas and pay it off each month. If you end up letting your balance carry over from month to month you’ll be paying them back the money they’re paying you to cover interest payments. That might be OK in a pinch but it’s not a good plan. So what credit cards offer student the best Gas Rewards Programs?

Discover® Open Road(SM) Card for Students

This card is for students with no credit history or a very limited one. Through the Discover® Open Road Card cash reward program, you will earn a full 5% in cash rebates for gas and auto maintenance purchases! There is no annual fee, and a reasonably low APR (16.99%) for those who qualify. Of course this only applies if you don’t pay your balance each month. Apply Now.

Citi® Drivers Edge Credit Card for Students

The Citi® Driver’s Edge Credit Card is for Students with average or good credit. It rewards you for every mile you drive. You’ll earn a 3% rebate for purchases at supermarkets, drugstores, and gas stations, and 1% on all other purchases. Plus, you’ll earn $1 for every 100 miles you drive. is no annual fee, and a reasonably low APR (14.99%) for those who qualify. Of course this only applies if you don’t pay your balance each month. Apply Now.

No matter what you choose to do, be aware that there are lots of ways to save money besides plopping pennies in a piggy bank and you should always be trying to think of them. Like anything else, you don’t become good with money without practice. If you’re a member of www.ScholarshipPoints.com you can use the code GIVEMEGAS to earn 15 scholarship points.

Ready? Here it is:

Relax and take a deep breath.

When faced with financial troubles remember that it’s only money, a man-made symbol of value which is traded for other items with perceived values. It’s not your life, your health, your family, your pet or anything that nourishes your spirit. It’s not always easy but if you can remember that and keep financial troubles from getting you down and letting your emotions rule your head you’ll come out of them far better off than if you let yourself get so down and depressed that you can’t see all the options in front of you.

The surest way to get into a financial bind is to let a small financial scratch become a major wound due to panicking or over-reacting with an emotional response. In other words very few financial struggles need to be resolved in 5 minutes unless they have to do with “Vinnie the Bookie” finally catching up with you in a dark alley. In most cases there’s a short term band aid and a longer term solution needed. It’s always a good idea to write an issue down on paper and then sleep on the problem or at least wait until your emotions subside about whatever it is. You’ll find your perspective will be a little different and you’ll see options you didn’t see before.

I have a friend who recently got into a bind with making a couple of late payments to some credit cards. He had a handful of cards between store cards and regular credit cards and was having trouble making his payments. He panicked went out and signed up for a consolidation loan with an interest rate higher than his credit cards had but it offered only one payment and a lower total payment than he was currently required to pay. For that benefit the loan was also going to make him pay more than double what he borrowed when all was said and done.

When he told me what happened I sat down with him and he said he didn’t have a budget so we downloaded the budget from http://www.studentplatinum.com/budget-template/ and started to look at his income and expenses. Once it was all in front of him he saw that he made more than enough money to cover his credit card payments and by listing them on his budget he was able to remember their due dates. I then gave him the credit card debt reduction plan and he figured out the smart way to pay off his credit cards. He took the money from the loan and paid back the loan and then started using a simple budget. Four months later he sent me an email telling me he paid off 4 of his 5 credit cards and was able to get the interest rate lowered on the fifth and was doing great.

The lesson is that there were two problems, one short term and one long term. He made a couple of late payments and that’s bad. In the short terms he needed to make the payments, call and see about getting the fees refunded but then calm down and take a look at the big picture. Long term he had to decide why was struggling? He thought he didn’t have enough money but really didn’t know where his money was going. In his panic he almost did something that was going to cost him a lot more money in the end to fix a problem that was really just a behavioral issue with the way he managed his money (it might have helped if he won a scholarship on www.ScholarshipPoints.com by entering the code: BESTIPEVR worth 10 points).

So remember relax, it’s only money. If you get yourself into hot water you can get yourself out. There will be penalties but you’ll want to make them as small as possible and to do that you need all the time available and a clear head to get the right solution. This doesn’t just apply to debt either. Letting your emotions cause you to buy a stock, a pair of $500 shoes or that timeshare in Kosovo is bad news. Think it over first and decide when you’ve had time to do a sanity check.

I just reviewed our traffic statistics for Student Platinum, its been a good month for us but I was surprised to see that our second most popular page is one that’s not even directly linked to from the site. The page is a resource page for high school students and first year college students. It summarizes the important facts about credit score, credit reports and student credit cards. It also provides a short list of credit cards which are doing a good job approving students with little or no credit history.

If you wish to check it out, here for the first time is the link to the page everybody’s been talking about: The amazing student credit page.

On February 13th I added a blog entry titled How My Credit Score Dropped 30 Points in One Day. This entry is a follow-up to that. To summarize the original entry, I paid off and closed my Chase credit card because they were jerking me around by raising my APR because I was paying my balance off too quickly after a 0% interest balance transfer. Aside from that being a highly unethical and downright evil way to treat me, I then screwed up in trying to sever my ties with them and they socked it to me- again.

I paid off my balance plus some extra to cover the interest that I calculated had already compounded for the current month. I then proceeded to pay no attention to the invoice the next month since the account was closed and I assumed they were just going to bug me about a credit of a few dollars. Little did I know, the interest they hit me with was $3 more than I paid with left the account open. Instead of a credit I owed them $2 which I didn’t know about and so didn’t make a payment. Chase was thrilled to charge me a $30 late fee, and then another giving me a balance of $63 which was over 30 days past due. This they submitted to the credit agencies who then rocked my credit score by an average of 30+ points. luckily I use a service that alerts me when somebody dings my credit report so I was made aware of this balance for the first time. I immediately paid the balance off and then called Chase hoping for a goodwill adjustmen. I was fine with surrendering the $60 to cover being late on the $3 but I wanted them to retract the negative mark seeing as it was obviously an mistake. Their answer to me can be summed up by: “too bad, don’t try to rob us of $3 next time”. No, they didn’t want to work with me on that.

Well I’m happy to report that my score corrected itself and went back up today to just a few points less than where it had been a originally. So if you are wondering how a late payment will hurt you it all depends upon how late and how many you have. I researched how this works and here is the deal:

One late payment hurts your credit score in a major way because you could potentially go 90 days late. 90 days late is what lenders really fear because after 90 days their odds of not getting paid without going to collections skyrocket. Once its reported that the late payment was made and you are back on track in under 90 days the penalty eases up on you to show lenders you are no longer a 90-day late risk. If you have a history of being 30-days late this doesn’t work out so well, the penalty can stick for repeat offenders.

Anyway, so I’m back on track and now I can look into taking advantage of the dropping interest rates to try and refinance my mortgage and save some money each month. I was about to do that when my credit score got socked by Chase. With the economy bogging down, credit requirements are getting tighter so that’s why my score dropping was such a killer.

By the way if you are a student who will be looking at private or consolidation loans in the next 12 months, don’t wait! You should apply now before the credit requirements raise higher! You can go here to learn more about how the credit crunch is going to affect your student loans.

Warning, there’s trouble ahead. There’s a strong chance that a serious batch of credit problems are headed straight for students which threaten to swamp their ability to get student loans and credit cards. A series of changes in the economy could result in student credit scores dropping more than 100 points overnight as well as those of their cosigners. On top of this lenders are battening the hatches by raising credit requirements. If student credit scores drop at the same time requirements increase its going to sink millions of students who rely on student loans and credit cards to help them through college. The storm is a product of the struggling US economy and the mortgage crisis.

Rolling Thunder: Dropping Credit Scores

FICO 08, the new credit scoring formula Fair Isaac (creator of the FICO formula) is pushing out to the major credit reporting agencies is expected to drop the credit scores of more than 75 million consumers, many of whom are students. The new formula is specifically targeting some activities used to build credit such as being an authorized user on another person’s account. It is also going to be much stricter about repeat late payments and also about not having a good mix if different credit trips which students usually don’t. Fair Isaac is doing this in response to fall out from the mortgage crisis. See the article What FICO 08 Means for Students for more details.

Lightning: Lender’s Raising the Bar for Credit Score Requirements
All lenders including those that offer student loans and consolidation loans as well as credit cards are becoming far stricter about what scores they require for approval. This means that you may have been approved a year ago and now very soon you could be declined with the exact same score. Lenders are doing this in response to the tightening of the economy.

Punishing Wind: Cosigners Not in Any Better Shape than Students

Traditionally when a student’s credit score is too low to qualify for a loan, they have the option to apply again with a cosigner. There are also standards for what the cosigner’s credit score must be and these are generally pretty high. Now with the lender criteria raising cosigners are also going to experience the impact of credit scores dropping due to FICO 08. This means suddenly you might have a serious problem even getting a cosigner.

It All Adds Up to the Perfect Storm

We can see a scenario where your credit score drops below the level needed to get school loans, you then will not be able to get a credit card to help rebuild your credit or a school loan. When you try to use a cosigner to at least get the school loan, their credit may also have been effected (remember this is going to hurt over 75 million people!). This could leave you in a really bad situation through no fault of your own.

How to Stay Afloat

The best advice we can give you now is to find out what your credit score is, expedite applying for any loans or credit cards you had been intending to apply for before your credit score potentially is hit and finally if you haven’t already, start educating yourself about your FICO Credit Score and take steps to improve it right away.

StudentPlatinum.com offers the Student Credit Forum for your specific questions as well as the Student Credit Education directory and reviews of the top Student Credit Cards. For help acquiring student loans or consolidation loans you can visit our partners at the Student Loan Network.

This is a very humbling blog post. It’s humbling but I also recognize that it’s an incredibly valuable lesson, particularly those with less credit experience than me or who are just starting out. Before I begin let me boil it down to one sentence for those of you in a hurry. READ EVERYTHING YOU GET FROM YOUR CREDIT CARD COMPANY IN DETAIL NO MATTER HOW INSIGNIFICANT IT MAY SEEM.

The Background

In February 2007 I decided to get a Chase Rewards Card in order to take advantage of a 0% APR for 6-months balance transfer option. I wanted to consolidate some smaller debts and free up some cash to pay down other debts faster. My plan was to pay only the minimum for 6-months while cleaning up the other debts and then when the normal APR kicked in I would have compounded available cash from the paid off debts to knock the Chase balance off in about 3-4 months.

I was diligent with my plan and executed it to perfection. When the regular Chase APR kicked in last summer I was ready to go and proceeded to make two consecutive quadruple payments. As I often do I called them one day to ask if I qualified for a lower APR since I was such a good customer (paid on time, more than the minimum, had a good credit score and history, etc.) The rep informed me that not only didd I not qualify for a lower APR but that they were going to move my APR from 11.9% to the maximum of 24%. I asked them why and was told it must be something on my credit report. I had a credit score of 730, no late payments in over 7 years, a great mix if credit including mortgage, auto loan and credit cards older than 10 years. The agent insisted that she didn’t know why then and there was nothing I could do about it.

I strongly suspected the reason that my APR was jacked up was because Chase made no money on me for the first 6 months due the 0% APR offer and some report revealed that I was a classic “gamer”. A gamer is somebody who takes advantage of low intro APR offers and never ends up paying the credit card company much in interest because they pay off or move their balance too fast. Companies who derive tons of money from fees and interest hate gamers.

The next day I made a balance transfer from my Chase Rewards card to my American Express and included an extra few dollars to cover any residual interest. Then since it was a new card anyway I cancelled the Chase Rewards card. I won’t have a long term relationship with a company who pulls out all the stops to earn fees off people unfairly rather than promote a lifetime business relationship.

Fast Forward to Today

All the Chase drama happened in November. I got a statement or two afterwards and tossed them assuming they owed me money and I enjoy when that happens because they owe me a few bucks and then have to spend money every month to tell me. Hey it’s a few cents every month but a small victory nevertheless.

Through American Express I have a service which alerts me of any changes to my credit report. It’s great, I like to tinker and see if I can always move my FICO credit score up but I have never received an actual alert- until today.

My alert informed me that I had a derogatory statement put on all three credit reports. I immediately logged in and saw to my disbelief that I am more than 30 days past due on my Chase bill. How can this be? I logged into my old Chase account to see that my “extra” payment made back in November was a couple dollars short of the interest charge. I had a balance of $3 which I didn’t pay for 2 months in which time it accumulated $60 in late fees and got me a negative comment on my credit report.

The credit report service from American Express allows you to also calculate your FICO credit score on the fly so I did that…30 points on average between the 3 credit agencies. My credit score got blown out of the water from this one thing!
I immediately paid Chase online and then called them to see if there was anything they could do about the negative report to the credit agencies. They passed me around to a couple of different people before informing me: Too bad, late is late and it’s your problem not ours.

So Chase got the last laugh. I now have to work even harder to get my score back up. I’m hoping the change will not be permanent and in a month or two when the balance shows I paid them their $3 and the account is closed it reflects that. I’ll let you know. In the meantime here again is the lesson learned.

READ EVERYTHING YOU GET FROM YOUR CREDIT CARD COMPANY IN DETAIL NO MATTER HOW INSIGNIFICANT IT MAY SEEM.

This goes doubly if you’re a gamer and move balances around frequently! Oh and I would personally not recommend getting involved with Chase for any number of reasons mentioned in this post.

Back in December of 2007 I posted a blog titled “Post Holiday Credit Card Trouble Ahead” warning that the economy will slide a little more quickly in early 2008 and your credit card situation could get tricky. I had suggested you get on top of your balances, APRs, etc. Well, did you?

According to a February 5th 2008 article in the Wall Street Journal, Credit Card companies are buckling down and making it harder to get credit, decreasing limits, raising fees and in general giving you a lot less breathing room if you’re a person will bad credit, limited credit or are a little under water. Here’s a summary:

Despite recent dramatic Federal Reserve interest rate drops, credit card companies are tightening their standards. Big issuers such as Citigroup and Bank of America are offering lower credit limits and requiring higher FICO credit scores. Others like Capital One are limiting credit line increases and even decreasing credit lines for people who are now considered risky (who may have not been considered so in 2007).

Companies such as American Express and JP Morgan have increased their late fees and the fees for balance transfers and across the board credit card companies are expected to make some adjustment to fees. Why would they raise fees to protect themselves you ask? In 2007 Americans paid $18.1 billion in late fees alone. Whoa. See the more they expect people to default and not pay them anything, the more they will try to recover that loss from those that will. That’s the cost of getting into bed with the devil, and that’s exaclty where you are if you are carrying high balances and are close to your limits.

So what can you do? Well the fist thing you can do is to know your credit score and work on getting it up and keeping it up. Most of this is going to effect those with medium to low credit scores. Here is a link to a service we use to monitor our credit scores: Equifax Credit Score and Credit Watch. This service will give you your credit score and some ideas about how to repair it. You can also check out our articles in the Credit Education Directory.

Next you can make sure you limit your credit applications. One of the things that could flag you as a person who a credit card company needs to be concerned with (and lower your credit limit or raise your apr) is several new credit applications. This can happen very easily. Let’s say you respond to a balance transfer offer then the next day go to Target and get offered a Target Rewards card, well that’s 2 inquiries in a month and that could be enough to flag you. In general I say no to all store credit offers and only apply for other loans or credit cards when I decide I want them, not in response to them wanting me.

Finally you should get a budget and a solid plan for getting out of bed with the devil, i.e. knocking down the credit card debt. I’ve put together this handy little program for you that I guarantee will work if you follow it. I gave it to my own sisted and am happy to say its working for her! Its called the Student Credit Card Debt Reduction Plan.

Good luck and I hope you don’t experience any of these things. If you want to comment or ask additional questions feel free to do it here or even better, in the Student Credit Forum.

As the subject of this blog post indicates, my esteemed colleague “Platinum Stud” has moved on to fulfill another calling. No he’s not running an orphanage in Tibet or building irrigation ditches in Antarctica or running a mission in the Amazon. He’s actually joined the circus. I appreciate his hard work and hopefully his readers do as well.

I’m kidding. He moved on to a new career track and so I’ll be taking his regular spot in the Student Credit Card and Credit Education Blog. I’ve done a couple of guest posts and I hope they were thrilling. Some of you might know me from my work in the Student Credit Forum (http://forum.studentplatinum.com) there I answer your specific questions and moderate the discussions.

I’ll try to keep this fresh and interesting and I’ll probably throw a few “best of the forum” posts your way. There are some great questions being asked there although I wish we had a few more members but alas these things take time.

Found at Walmart. It’s insane. I’d love to know how many bottles they gave away. At least, you can wear a Citibank T-shirt more than once. (Image/story from The Consumerist)

Student credit card offers seem to be everywhere, especially if you’re on a college campus. Some credit card companies actually target campuses; setting up little booths and giving away free stuff in exchange for your signature on the dotted line of the credit card application. While some people will tell you to steer clear of all credit cards, all the time- the fact is, you can have a credit card and make it work for you instead of against you.

The trick is to choose a credit card with the best interest rate you can get; and to select a card with a rewards program that will actually benefit you over the long term. Be careful of rewards programs that sound really good- but actually end up costing you more for the “reward” than the reward is worth!

With hundreds (if not thousands!) of credit cards to choose from, and many of them targeted directly to the college-age group, how can you choose a card that benefits you rather than helping you major in credit card debt?

Is a Rewards Program Right for You?

Many student credit cards offer rewards programs. Typical offers might include airline miles, cashback, discounts or free merchandise based on your card use. Some rewards programs don’t really reward the card user at all; and in fact, you may end up paying more for the program than you would for a credit card without the reward program! Confusing, I know.

As a student, if you find yourself flying home two or three times each year- a credit card with a frequent flier program of some type might be beneficial to you, especially if you can build up your miles and then redeem them for free flights. Just keep an eye on cards that offer these rewards in exchange for a high annual fee- often times, you pay several years of annual fees before you would earn a free flight in miles- and you end up paying more for the flight than if you just purchased it yourself.

What Will You Use the Card For?

Hopefully your goal for having a credit card is to improve or build your credit score. Often, as college students, you’re given the first opportunity to establish your credit history. Be careful not to blow it by racking up high credit card bills that you can’t pay, as that’s the quickest way into a downward debt spiral that will haunt you well after you have graduated college.

If you plan to use the credit card for one or two small purchases each month (and then to pay them off in full when the statement comes!) you probably don’t need a card with any extra bells and whistles and a rewards program is not likely to be all that rewarding for you. If the card offers a rewards program without an annual fee; it doesn’t hurt to get one but keep in mind you may never qualify for much in terms of “rewards” as long as you are making small purchases and paying them off immediately. What you will receive though, is a stellar credit rating that will be your best friend once you’ve graduated college and need to get higher priced items- like a home, new vehicle, or sadly- even when you apply for employment. Many employers use your credit rating as a way to determine your worthiness on the job, also!

While there is no need to be afraid of credit cards, or to avoid them all together- it is very important that you use a credit card to your advantage by selecting one with the lowest rates that you qualify for, and then using it responsibly to avoid a degree in credit card debt! Having a credit card handy for emergencies or to establish your credit is a benefit that is well worth the effort.

* * * * * *

Debbie Dragon writes about responsible use and selection of student credit cards for CreditorWeb.com.