Money Talk: credit cards, the tamable beast

How to not fall into the credit trap and make credit work for you

When it comes to credit cards, they can seem like a mysterious force that can too easily take control of your financial life.

While this is definitely true, it’s not as easy to fall into the trap if you know how to shop for credit cards and use them properly.

Being enrolled in a college or university, and thus taking out loans out to continue your education, makes you a prime candidate for credit card companies looking for inexperienced clients. Getting all these offers isn’t a bad thing, so don’t just tear them up and throw them out. Look into the finer details.

While most offers a college student will receive feature fixed or variable intro APRs, or Annual Percentage Rate – that don’t vary all that much – within the mid-20s and there are those that make offers in the low teens.

APR represents the amount charged for borrowing and for those building credit for the first time, you’re more inclined to receive variable rates based off a 12-month period.

While it is easier to look into the offers that you might get in the mail, you’d be doing yourself a favor by comparing various cards available to your credit score limit online.

Thankfully, there are a number of websites that allow you to compare cards side-by-side for free. Some credit card companies offer the same service for free.

A 12-month period is important for two main reasons, the first is that it allows the credit loaner to see spending habits and gauge what type of risk one presents, which is why some intro APRs vary by as much as 15 points.

The second reason those 12 months are important is because within that period, you’re able to learn how to use that card without going over your limit, or worse, not being able to pay your limit.

The rule of spending using credit cards with the intent of building or rebuilding credit is utilizing the card for small purchases and then staying within 30 percent of your overall credit limit.

Staying within 30 percent of your overall credit limit is important because all of your credit accounts – including the loan you took out for school – are connected to your credit score, which is accessible to financiers, creditors and you.

If you’re spending close to your credit limit, even if you’re paying it off in a timely fashion, it can seem like you’re having some kind of financial problems, which makes you high-risk.

Being high-risk lowers your credit score, and having a low credit score leads to a plethora of financial dilemmas.

While attempting to stay within the 30 percent range of your credit limit, have consistent payments is vital to get the best APR rate and credit score possible.

While it is completely feasible to pay your credit card debt before the initial due date, it is possible to delve into grace periods. If you’re just starting out that can be dangerous territory.

Setting up automatic payments for your credit accounts can help take the stress off keeping up with payments, only having to worry about having the money to pay your debt.

Credit cards are complex tools, but by going through the fine print, having a plan and goal for your credit spending makes it all the more easier, and rewarding depending on the card you have.

Utilizing your card correctly during your first year with one will leave you in a better position for years.

Kenneth Kashif Thomas is the senior features editor and can be reached at Follow him on Twitter at @KenUBSpec.