Headed For College: Selecting a Credit Card

A credit card can be a valuable financial tool. These tips should help you choose the right credit card for you.

Build good credit
You build a good credit history by using a credit card wisely. Make purchases and then pay your credit card bill in full every month. If this is your intent, look for a card with no annual fee. High interest rates won't matter since you won't be paying interest anyway. Your card should have a 20- to 30-day grace period so that interest won't be charged if you pay the balance in full every month.

For convenience
Having a credit card is much easier and safer than carrying large amounts of cash with you. If you plan to pay the balance in full every month, look for a card with no annual fee and a 20- to 30-day grace period. You might, however, opt to get a debit card attached to your checking account. It won't allow you to build credit, but it won't allow you to build debt either.

For the freebies
Some cards allow you to build points with every purchase towards free merchandise or airline miles. Be aware that these cards usually have a large annual fee and a high interest rate. You might be better off buying whatever freebie you're trying to earn.

To carry a balance
It's not a good idea to carry a balance on a credit card. But if it's too late and you're already carrying one, seek out a card with a low interest rate. If you find a card with a low interest rate, find out how much they will charge for balance transfers and an annual fee. Then figure out how much you will save in interest using the Cost of Credit Calculator. If you can save more in interest than you pay in fees, it's a good deal. If not, keep looking. Whatever you find, the most important thing is to pay off that card as soon as you can - even if you have to eat nothing but macaroni and cheese for months.