College students can build credit, despite new rules - WTVM.com-Columbus, GA News Weather & Sports

ConsumerWatch

College students can build credit, despite new rules

By Zaneta Lowe  - bio | email | Twitter

COLUMBUS, GA (WTVM) - Research shows more than 80% of college students had credit cards in 2008 and the average amount of debt was more than $3,000.

The new credit card law passed earlier this year includes some provisions that provide protections for young people, but it could also affect their ability to build credit history.

"It's been rough, it's been you know, you got that plastic money and can't always pay it back so," says Columbus State student David Hood.

Students like Hood say there is only one reason they turned to plastic in the first place.

"I thought it would be a great way to build credit."

"My credit cards actually did me some good, I pay it on time, I did it to establish credit which I've done successfully, good credit," says CSU student Amber Lewis.

That's credit that could soon be harder to come by though.  The new credit card law prohibits lenders from issuing cards to people under 21 unless they have a co-signer or can prove they can afford the payments.

It also bans credit card companies from offering students free gifts for signing up.

"So many students have generated tremendous amounts of debt, credit card debt for the cost of a t-shirt," says Dr. Norman Godwin, C.P.A. and Director of the School of Accountancy for Auburn University.

So how can college students effectively build credit considering the new changes?

"One way to build credit is to have your parents put you on, or put the child on as an authorized card user," says Godwin.

Godwin says another idea is to get a credit card, but not to make purchases, but rather to make payments.

"For example, I put my phone bill on my credit card, instead of paying the phone monthly, I pay the card monthly."

There's also the option of what's called a secured credit card.

"It's basically like a prepaid credit card where your deposits in the bank serve as collateral on your charges on your card," explains Godwin.

A few more tips for college students:

  • If you are considering a credit card, don't be enticed by so called rewards.
  • Free airline miles and cash sound great, but you'll actually spend more if you don't use the card responsibly.
  • The same goes for teaser rates.  Some cards may offer you a really low rate to start, but that often changes and experts say interest could double or even triple if you make a late payment or miss one all together.

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