It sure is a great feeling to see your Hinman Box stuffed with mail. What a lousy feeling when everyone who writes to you is trying to sell something!
Banks send mass mailings about their credit cards to every mailbox on this campus. And in case they missed your HB, there are plenty of extra applications dispersed around the Hopkins Center fro the Performing Arts.
A credit card is a great thing to have, as long as it is not abused. As college students, we're some of the biggest credit spenders around, but because most of us have not established any kind of a credit record, companies feel no obligation to offer us the special deals they give to their more "reputable" customers.
Credit card companies make their money in three ways: annual fees and interest charged to customers and "per purchase" fees charged to merchants. They still make money even if the card user pays no interest or fees.
In fact, many of us are paying much more than we should for the use of credit and should consider whether our current card is as good a deal as it was when we obtained it.
The key things to consider when evaluating your current card or looking for a new one are acceptance, annual fees, grace periods and interest rates. The most accepted cards around are Visa and Mastercard. Fewer places accept American Express or Discover.
In the past year or so, there has been fierce competition among credit card companies, resulting in some great deals for us. Only a year ago, the typical college student credit card charged about 20 percent a year in interest as well as annual fees of about $25. Today, anyone can get one with a rate closer to 16 percent and no fee.
However, many of those who obtained their cards a year ago are still paying the old high rates. In most cases, all you have to do to get the new lower rates is make a phone call to your bank. Threaten to drop the card unless they waive the fees and give you a competitive rate. I recently did this and it worked!
There are two kinds of credit card users: those who pay their balance in full each month, and those who pay a portion, allowing the rest to carry over while interest accrues. While interest rates are often the main point of an advertisement, they are irrelevant if you belong to the first category. Instead, you should look for a card with a long grace period. Grace periods tend to vary from none at all up to 30 days. This means that you can pay off your balance interest free up to 30 days from the billing date.
On the other hand, if you tend to pay off less than the full balance, or think you might need to occasionally, then it pays to look for a low interest rate. If you keep a balance, you should pay no attention to grace periods.
Now let's look at some of the cards. I took a walk through the Hop and picked up every application I saw. Most of them were different banks offering Visas and Mastercards. These two are pretty much the same thing in this country. Most banks issue both and most businesses take both. The reminder of the applications were for American Express and Discover cards.
The longest grace period I came across was Chase, which is "30 days on average." Some say "at least 25 days." PNC Bank says "up to 25 days," which doesn't tell me a whole lot. Watch the wording. If you're looking for a card with a low rate, you may see some very low numbers advertised. Be aware that most of these are introductory rates, good only for the first year, after which they shoot up.
Unless you're going to remember to throw out your card and transfer your balance to a new one when the good rate expires, I'd recommend only comparing the standard (non-introductory) rates. The lowest standard rate that I came across was 16.15 percent from PNC Bank. However, even this is still a very high rate.
For reference, a non-student with a full-time job and a good credit rating can easily get a card at closer to 12 percent. Several banks even charge less than 10 percent, though they don't advertise much. If you're going to keep a balance, it's probably worth a few phone calls. Or consider other types of loans and don't keep a balance on your credit card.
The remaining applications were for American Express and Discover. These are cards offered issued exclusively from the respective companies, not through banks. The main problem with these cards is that they just aren't accepted in as many places.
In addition, American Express still carries a steep $55 annual fee and does not allow you to borrow money when you need to. You may have seen commercials that say things like "you pay no interest" or "you're in control of your finances." All this means is American Express forces you to pay your balance in full each month, and they will come banging down your door if you don't.
By contrast, you always have the option of paying your Visa or Mastercard debt in full (within the grace period) and incurring no interest charges. The only nice thing I have to say about American Express is that there's no credit limit and they have friendly operators standing by.
Discover has a deal where you receive a certain amount of cash back at the end of the year. Unfortunately, it's very small amount (up to 1 percent). But since there's no annual fee, you have nothing to lose by obtaining this card.
These are the main points of comparison. Of course, there are other considerations to be made in choosing a card. The Apple Citibank card will give you rebates towards your next Macintosh. Other cards give you a frequent flier mile for every dollar you spend. The bottom line is of course whether you save more than it costs you, and whether you can comfortably sit down with all that plastic in your wallet.
