Researchers hired by MetLife’s Mature Market Institute surveyed more than 2,100 Americans between the ages of 21 and 65. They took a look at how three age groups viewed financial obligations: baby boomers (born between 1946 and 1964), members of Generation X (born between 1965 and 1976) and members of Generation Y (born between 1977 and 1990). They found a strong desire among all ages to help family members in financial need. But there are limits.

Across the board, 76 percent across all groups felt either a strong or moderate obligation to help children with expenses such as college costs and said they would contribute an average of at least $10,000. A smaller percentage felt obligated to help children buy a house or provide an inheritance. But when it comes to helping them climb out of credit card debt, the message seems to be, “You’re on your own.”

Motivation grows for paying for college
The number of Americans receiving financial help from their parents to pay for college is increasing with each generation. Just more than one-third of baby boomers (35 percent) but nearly half of the Gen Y-ers (46 percent) said they got help from their parents in paying for college.

So how much should you chip in as a parent? Take a look at your own financial situation first, says Brad Klontz, a financial psychologist and co-author of “Mind Over Money: Overcoming The Money Disorders that Threaten Our Financial Health.”

If you’re saving enough for retirement and taking care of yourself, go ahead and help out with college costs, Klontz says. But don’t get yourself into financial trouble.

“We love our children, but at the same time it’s quite a burden on them to worry about taking care of you as you age because you didn’t take care of yourself,” Klontz says.
“When parents put aside their own needs, they’re more likely to pay higher tuition at schools rather than going more affordable routes.”

Reasons for debt matter
When it comes to helping kids out in a financial setback, much depends on how they got there. Forty-four percent of parents across all ages say they feel compelled to help an adult child with a financial setback not of their own making, such as job loss, illness or divorce. But only 11 percent felt strongly that they should help out when their sons or daughters sink into debt from overspending. Baby boomers are the least likely to feel the need to help an adult child get out of debt.

“There was some tough love from respondents,” says John Migliaccio, the Mature Market Institute’s director of research. “If a child got into trouble through no fault of their own, everybody was willing to step in, but, if they were less than responsible, [parents] had a much lower sense of responsibility.”

Tough love is a good thing in the case of credit card debt, says Klontz, who adds that families are struggling to deal with this relatively new reality. Traditionally, families have always helped each other. But now, credit cards let people get into much more trouble.

“Before, it was you ran out of money and you need a place to stay,” Klontz says. “Now it’s I have $20,000 in credit card debt. People have the ability to get in a deeper hole.”

One of the most common referrals Klontz gets from financial planners is a client who should be financially set, but is having trouble because he or she keeps bailing out adult children.

“I call that financial enabling, which is financial help that hurts,” Klontz says. “When someone behaves irresponsibly, it’s a little like giving alcohol to an alcoholic so their hands won’t shake. It will cure the symptom in the short run, but it actually contributes to the problem.”

A better tactic is teaching children responsible spending from a very early age – as early as age 3 or 4.

“Passing down your money is a good thing. Working really hard to pass down your values is a better thing,” Klontz says.

Retirement trumps inheritance
When asked to prioritize funding their retirement, those closest to retirement age say it takes precedence over leaving money to their children. Seven in 10 baby boomers say funding their retirement beats leaving an inheritance. Just 64 percent of Gen X-ers and 57 percent of Gen Y-ers agree.

Baby boomers are more focused on their retirement because they feel they’ve done their job, Migliaccio says — they’ve raised their children, they’ve educated their children and they feel it’s OK to turn more attention to themselves. They also want to avoid being a burden to their children.

Migliaccio likens it to the flight attendants’ instructions before takeoff.

“They say when the oxygen comes on, put your own mask on first and then put it on your child,” Migliaccio says.

In other words, if you aren’t able to take care of yourself financially, you provide even more problems for your kids down the road.

It’s not only a fast and convenient way to pay. It will also help you build your credit history and develop a great credit score for the long-term.

Even better, it’s not that hard to develop great credit; it just takes time and discipline. If you start using credit early, pay all your bills on time and don’t max out your credit cards, you will build a solid credit foundation within just a few short years.

That said, there are all sorts of credit bloopers people make on the path to building perfect credit. Here are six tips to avoid the most common missteps:

1. Spend for today, not tomorrow.
One of the most common mistakes college students make, says Kim McGrigg, Community and Media Relations Manager at Money Management International, is to spend tomorrow’s money today.

“Many students assume that they will get a job at a certain income level as soon as they leave school,” says McGrigg. “As a result, they spend according to what they hope the future looks like. Unfortunately, many don’t get that dream job when they graduate.”

Having to deal with both student loans and credit card debt after graduating from college makes for a very difficult start in life. To avoid this mistake, McGrigg advises, it’s key to spend according to what is happening right now, not what might happen in the future.

2. Use your card, but use it well.
Credit cards offer a great tool to build credit, because they give you a chance to demonstrate that you can manage credit well. However, therein also lies the challenge. It may seem like paying that bill late or missing a payment one month isn’t that big a deal — particularly if it’s just a small amount.

But it is a big deal. Seemingly small lapses, like paying a bill late or carrying a high balance, will have a big effect on your credit score and not in the direction you want.

3. Expand slowly.
Showing that you can manage several credit cards and different types of credit also helps improve credit scores over time.

But take it one step at a time. Don’t rush into opening several credit cards and don’t apply for new credit too often. Demonstrate to yourself that you can manage one credit account well before you move on to the next.

4. Never forget: Relationships matter most.
Thanks to new rules for student credit cards, it’s now much harder to qualify for a student credit card if you’re under the age of 21. Underage students have to prove they have enough independent income to pay their bills or they have to have someone co-sign their credit card account.

Unfortunately, according to McGrigg, having someone co-sign your credit card can easily backfire.

“Many people don’t recognize the potential impact that mixing relationships with money can have,” says McGrigg. “Everyone has good intentions, but unfortunately, it doesn’t always work out. At best, it complicates the relationship, at worst, it damages the relationship.”

A co-signer is 100 percent responsible for the debt on the credit account he or she co-signs on, so think long and hard about it before entering into that kind of relationship.

5. Get help early.
When people do make mistakes and run into credit problems, instead of tackling them, most follow the example of the ostrich: They stick their head in the sand.

“When they start to realize they can’t pay the credit card, many students ignore it, and don’t get help,” says Sandy Shore, a spokeswoman with Novadebt, a nonprofit debt management service. “That can be really devastating to their future prospects. When they graduate and want to get a job, many employers look at the credit report. If that’s really messed up, it will be harder to find work. And there’s nothing they can do about it.”

6. Continue to learn.
There’s a lot to learn about credit management and financial skills in general, but investing a little time in learning about it will serve you well throughout your life.

“Think more long-term than short-term,” says McGrigg. “I always encourage students to learn more about money, even if their major has nothing to do with money. Credit and money management is something that they are going to have to deal with for the rest of their lives.”

The bottom line: Building your credit score now will pay dividends in the future. That’s because having a high credit score gives countless advantages in life. Credit scores determine how easy it is to get a loan, what terms you will be offered and how much you have to pay in interest.

If you develop bad credit, in contrast, the doors could be slammed shut on features of modern life that are often taken for granted. For example, you may have trouble getting a car because few lenders will approve you for an auto loan. Similarly, you may struggle to find a nice place to live because prospective landlords often hesitate to take tenants with bad credit. You can also wave goodbye to the dream of buying a house, since lenders will not approve you for a mortgage loan if you have bad credit.

In short, your credit rating has a tremendous impact on your financial life — both now and in the future. Build it wisely.

(Updated 10-20-2011. Originally published 05-22-2009.)

There are many reasons to be cautious — particularly when you’re on a limited income. However, once you graduate, it will be much harder to get accepted for your first credit card, say experts, so it’s a good idea to start with one now if you can.

“When beginning post-college life, it will be a great help to already have established a responsible credit track record,” said Gail Cunningham, Vice President of Public Relations at the National Foundation for Credit Counseling in an email. “For someone with no credit history [after college], even seemingly small steps, such as obtaining a credit card can be difficult, not to speak of buying a car or a house. [Without a credit history,] you may have trouble turning your dreams into reality.”

However, credit cards can quickly lead to financial disaster if you’re not careful, so it pays to be cautious. Here are eight do’s and don’ts to make sure you derive the full benefits from student credit cards and steer clear of the pitfalls:

DO:

• Get a student credit card. Anyone over 21 can easily compare and apply for a student credit card online or take advantage of mailed credit card offers. If you’re under 21, you must be able to show that you have enough income to pay the credit card bills or get someone to agree to be a co-signer on the card.
• Use the card to build your credit score. Your credit history tracks how well you manage credit. This history is recorded in your credit report, which forms the basis of your credit score. Establishing an excellent credit score will open doors for you in the future. It doesn’t just enable you to get approved for car loans or mortgages down the road. It will also make you look better to prospective employers. To build an excellent credit score follow the basics of good credit management: Pay all bills on time. Don’t carry balances above 30 percent of your credit limit and slowly build a solid long-term credit history showing you can manage a variety of credit.
• Start small. Most student credit cards come with a fairly low credit limit — sometimes as little as $300 to $500. It can be tempting to take out several credit cards to get access to a higher line of credit. However, juggling too many credit cards can get complicated fast and increase the likelihood of late or missed payments. That will hurt, not help, your credit score. “Ultimately, anyone seeking to build a high credit score will need at least three open and active lines of credit to have enough data to create a score,” says Cunningham. “But when you’re first starting out, it’s important to prove to yourself first that you can manage credit well before moving on to the next card.” Get into the habit of managing one credit card and learn the ins and outs of credit card use before adding another credit card.
• Ask for credit limit increases. Once you have paid your credit card on time for six to twelve months and otherwise used it responsibly, you may be eligible for a credit limit increase. Having a high credit limit makes it easier to build a good credit score. It will help boost a part of your credit score known as your credit utilization ratio, which is a measure of how much of your credit limit is available to you to use. How do you get a credit limit increase? After a year or so, simply call your card issuer to ask for one. In most cases, the customer service agent can give you a reply based on how well you have managed your credit card account. If they ask for permission to pull your credit report, decline it, as this will hurt your credit score. Instead wait, and call back six months later.

DON’T:

• Go for the first credit card offer you receive. You wouldn’t buy the first car you come across or marry the first guy (or girl) you go out on a date with. Credit cards are no different; it’s important to explore your options before applying. Building credit is a long-term process, so make sure the credit cards you take out give you the best terms possible. Compare mailed offers to student credit card offers online to see which offer the best deal. Then decide which to apply for.
• Mistake credit for cash. One of the most common mistakes people make when they get their first credit card is to treat their new line of credit like money in the bank. Part of building credit is to make sure your spending is in line with your income. Just because your friends can afford spending money on bars, spring vacations and frequent mall trips doesn’t mean you can afford it. Never use your credit card to pay for extravagances you wouldn’t otherwise be able to afford.
• Pay just the minimum. With credit cards, it’s a lot easier to lose track of your spending and slowly build up credit card debt over time. And don’t just think you will easily be able to pay it back once you graduate. “The biggest mistake many students make is that they get credit with the assumption that they are going to pay it back, when they graduate and get a good job,” says Sandy Shore, spokes person for Novadebt, a credit counseling organization in New Jersey. “So they are deficit financing and get out of college with credit card debt of $3,000 to $10,000, in addition to high student loans. But it’s not that easy to get a job these days, and many end up with high debt and no job.”
• Charge more than you can pay off in full every month. If you can’t pay it off, don’t charge it.

Finally, don’t neglect to learn more. When it comes to building credit, the more you know, the more you stand to gain. Continue to learn about credit cards and the basics of good credit management. Just like college, learning how to use credit is an important part of creating a foundation for a stable financial future. Five years from now, you’ll be glad you did.

Can credit card debt make you feel better about yourself? For most people, this would seem counterintuitive. However, a recent study found that some young adults do get a boost in confidence from their debt.

Researchers at Ohio State University found that, among young people aged 18 to 34, those with higher levels of student loan debt felt more empowered and had a greater sense of self-worth. Young adults with higher levels of credit card debt, in turn, showed a similar pattern. The results were part of a large nationwide study conducted by Ohio State’s Center for Human Research and were based on interviews with more than 3,000 young adults.

For most people, debt is viewed as an unwelcome burden — causing many to wonder why it would be perceived so differently by young adults. However, experts hypothesize that debt could lead to a temporary sense of control.

“Debt can be a good thing for young people,” said Rachel Dwyer, lead author of the study and assistant professor of sociology at Ohio State University in a university news release. “It can help them achieve goals that they couldn’t otherwise, like a college education,”

According to Dwyer, the researchers had expected that student loans might be viewed as a positive investment in one’s future, but they expected that credit card debt would be viewed more negatively.

“Surprisingly, though, we found that both kinds of debt had positive effects for young people,” said Dwyer in the release. “It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.”

The effect was greatest among young adults from low-income or middle class families. In fact, students who came from families in the bottom 25 percent of income levels showed the strongest link between debt and self-esteem: The higher the debt, the greater the boost to self-esteem and feelings of mastery. Young adults from middle class families didn’t derive greater self-confidence from educational debt, but they did from credit card debt. In contrast, those from the most affluent families showed no correlation between debt levels and self-esteem.

Some experts caution, however, that the results of the study might not be as clear-cut as they might seem. “The study could be confusing correlation and causation,” says Anya Kamenetz, author of “Generation Debt.” “It’s entirely possible that the students who have more confidence in themselves are more likely to take on more debt, because they already have this image of themselves that they can do anything that they want.”

Kamenetz also points out that the data for the study was collected back in 2004—long before the 2008 credit crisis reshaped our way of thinking about debt and spending in significant ways. Would the study authors find the same results if they repeated the interviews today?

“A lot of things have changed 180 degrees in just a few years.” says Kamenetz. “Many young people have seen their parents go through unemployment, and they themselves are dealing with the aftermath of the recession in different ways.”

In short, you live, you learn. As evidently, did the young adults in the study. The researchers found that the older study participants — those aged 28 to 34 –were far more likely to feel burdened by debt. They also reported a reduced sense of mastery and control as a result of their debt.

“By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs,” said Dwyer in the news release. “When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped.”

A new study from the University of Houston Law Center found that the provisions in the Credit CARD Act of 2009 appear to have produced little change in card issuers’ marketing practices – despite the law’s stringent requirements.

Since the new rules took effect in February of 2010, credit card issuers are no longer allowed to:

• Offer credit cards to applicants under the age of 21, unless the applicants have a qualified co-signer or they have sufficient independent income to cover a card’s minimum payments.
• Market to students on campus or offer “freebies” to entice students to apply for credit cards.
• Mail pre-screened credit card offers to consumers under the age of 21, unless the consumer gives the credit bureaus permission to share their credit information.

However, according to Jim Hawkins at the University of Houston Law Center, the rules may not have as much teeth as legislators hoped. In a survey of more than 300 undergraduate students at the University of Houston, Professor Hawkins and colleagues found that a significant number of students under the age of 21 came into direct contact with credit card companies – after the rules took effect.

Among the survey’s findings:

• 76 percent of students under the age of 21 reported that they had received a credit card offer in the last year.
• 32 percent of freshmen reported seeing credit card companies market to students on campus, and 72 percent of freshmen reported seeing credit card issuers market to students off campus.
• 47 percent of all students who were surveyed said that they had seen credit card issuers offer tangible gifts to students.

Perhaps most disturbingly, 29 percent of students under the age of 21 said that they had obtained credit cards in the last year by listing student loan proceeds as “income.”

So what gives? Are credit card issuers breaking the new credit card laws? Not likely, say experts. Rather, the card issuers are simply taking advantage of the Federal Reserve Board’s liberal interpretation of the Credit CARD Act.

For example, Hawkins points out that although card issuers are not allowed to hand out applications or freebies to students on campus, they are still allowed to send student credit card offers and free gifts through email. They are allowed to do so because, according to the Federal Reserve, “an email address does not physically exist anywhere, and therefore, cannot be considered an address on or near campus.”

The Federal Reserve Board’s broad interpretation of the Credit CARD Act also allows credit card companies to count student loans as income because the rules require card issuers to simply have “financial information” available that indicates that the student can pay. Not surprisingly, the credit card companies have responded to the Federal Reserve Board’s liberal interpretation by considering student loan proceeds as adequate proof that a student can pay at least the minimum amount due on their cards.

When consumer advocates suggested that credit card issuers be required to verify student credit card applicants’ assets or income and/or only consider income that has been earned through employment, the Federal Reserve Board declined.

“Some [students] are using cosigners and some are using income/assets from a variety of sources to apply for credit cards,” said Hawkins in a statement. “Theoretically, a student could take the proceeds of a student loan and deposit it in a bank account and then count the proceeds as an asset on a credit card application.”

Experts say that this is probably not what Congress had in mind when they tried to halt the national trend toward mounting student credit card debt. If the University of Houston survey is any indication, provisions in the Credit CARD Act are unlikely to protect students as much as hoped.

Featuring the faces and names of the three celebrity sisters, the Kardashian “kard” is being marketed to the teenaged fans of the reality stars. Sounds innocent enough, so why all the bashing? Because the “kard,” perhaps not surprisingly, comes with a long line-up of hefty fees. For starters, there’s a $59.95 sign-up fee to use the card for six months (or $99.95 to use it for a year), and a $7.95 monthly fee after that (the equivalent of a $96 annual fee). The “kard” features a slew of other fees, including a $9.95 card replacement fee, a $1.50 ATM withdrawal fee, a $1 fee to check the balance at ATMs, and a $1 fee to load money onto the card other than via direct deposit from an employer or the Mobile Mone Wallet service, plus a $1.50 fee to talk to a customer service operator.

In short, parents, who get this card for their teen or tween and load a $100 monthly allowance will end up spending $8 a month and upwards in fees for the pleasure. If money is loaded once a month and the cardholders makes an average of three ATM withdrawals per month, each time checking the balance first, plus one phone call to a customer service department, the monthly fees will amount to a total of $7.95 + $9.50, for a total monthly charge of $17.45. That’s roughly $210 per year to let your kid spend a $100 monthly allowance via the “kard.” Compare that to the free debit card that comes with most checking accounts.

The Kardashian “kard” episode is a good reminder that when it comes to prepaid cards, it’s important to take a careful look under the hood, so to speak. Prepaid cards can have many virtues, particularly for parents who want to teach fiscal responsibility to their kids. Because prepaid cards don’t offer access to credit, (it’s only possible to spend the money preloaded onto the card), prepaid cards can be a great way to teach junior good plastic management habits, without the risk of excessive spending that comes with credit cards.

However, prepaid cards in the past have mainly targeted people with bad or no credit, and many come with multiple hidden—and hefty—fees. As prepaid cards are becoming more popular, competition is forcing fees down. However, there are still many bad apples in the barrel, so to speak, so it’s important to do a little digging to find a card without exorbitant fees.

The best prepaid cards feature no (or low) monthly fees and few other fees. In addition, many prepaid cards targeting teens give parents an extra degree of control of their child’s expenditures. Some prepaid cards include features that allow parents to shut the card off if the cardholder spends over a certain amount in one day, or if the balance hits zero. Some cards will even give parents the option to approve a purchase, or send a text message to let you know that your teen’s balance is dwindling.

Cards designed specifically for teens include VisaBuxx ($10 opening fee), the Obopay Prepaid Mastercard (featuring a $1.95 monthly maintenance fee), and the Current Card for Teens by Discover Card (no monthly fees). Designed with parents and kids in mind, these cards allow parents to check the balance online and automatically transfer their kids’ allowances every month.

Still, these prepaid cards are not without their own slew of ATM withdrawal fees, paper statement fees, and customer service fees. Most of these can be avoided, however, if the card is used with this in mind, and parents wanting the extra feature of being able to keep an eye on their teen’s spending may find that the charges are worth it.

Students headed off to college this fall expect to find a different crop of credit opportunities than in previous years. In an effort to tackle the issue of mounting student credit card debt, the new CARD Act of 2009 put in place numerous new curbs on when and how card issuers can extend credit to those under 21.

The new rules have caused many parents to breathe a sigh of relief, and some students to rail against the new restrictions on their financial liberty. However, whichever side of the issue you might fall on, take heed: the way the new rules are being played out, while on paper student credit cards may appear to be taking on a new face, in reality, it’s likely to be business as usual.

Here’s a look at the new student credit card rules and how they are being implemented by major card issuers:

The new rule: A co-signer is required for people under 21 years old applying for credit cards, unless they can demonstrate sufficient income.

The reality: Large banks were quick to realize that managing a co-signer requirement would be a logistical nightmare, given the volume of credit card applicants they process. So while smaller banks and credit unions may require co-signers on credit card applications for those under 21 years old, online applications for major card issuers so far have no such requirements. Instead major card issuers have opted for compliance with the second part of the rule, relying on applicants below 21 to demonstrate sufficient income.

The new rule: People under the age of 21 applying for a credit card must be able to demonstrate sufficient income to pay the monthly credit card bill.

The reality: The term ‘sufficient income’, of course, is rather vague, and Congress left it to the Federal Reserve to specify exactly what constitutes “sufficient income” for credit card applicants under 21, and how exactly that income must be demonstrated.

Whether by intent or omission, the Fed opted to set very lax standards for evaluating income. Firstly, the Fed defined sufficient income as “the ability to make the required minimum periodic payments on the proposed extension of credit.” The Fed, in other words, went as far as creating an entirely new underwriting rule for student credit cards, disregarding the financial drawbacks of paying only the minimum on student credit cards earning interest as high as 23.99 percent.

The Fed also declined requests that card issuers be compelled to verify income or asset information stated on applications submitted by consumers under the age of 21. Instead, the Fed rules require card issuers to have available “financial information” indicating the consumer has an independent ability to make the monthly minimum payments.

The upshot is that getting a student credit card in the post-credit card reform era appears to be as easy as ever. Little else is required than going online to fill out a credit card application and offer up a number for your income from wages and “other sources,” including scholarships and grant money. According to card issuers, credit limits on new student credit cards typically range from $300 to $2000 or higher, and increase with a regular payment history.

The rule: Card issuers are no longer allowed to solicit new customers directly on campus, and they cannot give out freebies to tempt students to sign up. In addition, colleges and universities no longer are allowed to give out student contact information unless the student opts in for receiving such offers. Colleges must also disclose any marketing agreements they have entered into with card issuers and provide financial literacy education, including credit card education, as part of the freshman orientation.

The reality: The reality of this rule is still taking shape on campuses all over the country. If you wish to see how it is being played out, follow the results of a recent investigation into the credit card marketing practices at New York state colleges and universities launched by New York Attorney General Andrew Cuomo. Cuomo is seeking to determine whether colleges are giving out personal contact information for students without their consent, and looking into marketing agreements for college affinity credit cards that may offer a kick-back to the educational institution. The findings will be interesting to follow, as they will likely reflect common practices in other parts of the country.

The first group of card issuers includes major card issuers like Citigroup, Discover, and Capital One, which all are leaders in the student credit card space. These lenders advertise a variety of online student credit card applications, and offer credit cards without a co-signer to students between 18 to 21. While these cards offer the convenience of having a credit card, they can quickly become costly companions if not used wisely. Purchase APRs can range as high as 24.99 percent, and these student credit cards also feature high penalty rates for those who pay late or otherwise don’t comply with the card terms.

The second group includes card issuers that don’t actively advertise student credit cards, including issuers of low interest credit cards, as well as smaller banks and major credit unions, like the Pentagon Federal. Most of these card issuers, although not advertising it, do issue credit cards to students, even in the 18 to 21 age group, and many offer credit cards with APRs as low as 9.99 percent and far less onerous terms. The catch, however, is that students who don’t have some past credit history are less likely to be approved for these cards or (as in the case of Pentagon Federal), may be required to bring in a co-signer.

In short, getting approved for the best credit cards available to college students may turn out to be a two-step approach. If you’re just starting out building a credit history, the credit card options available will be limited, and the terms less favorable. However, those stage-1 credit cards are excellent tools to begin to build a credit history. This will enable you to qualify for credit cards with better terms in as little as 6 to 12 months.

If you are just starting out building credit, here are a couple of credit card options for college students without a previous credit history.

Leading student credit cards in this group include the Citi Forward Card for College Students and the Discover Student More card. The Citi Forward Card lets new cardholders earn up to 8,500 bonus points (redeemable for a $50 cash back) if they sign up for paperless credit card statements and make $250 in purchases within the first 3 months of opening the account. While the card advertises purchase APRs ranging from 12.99 percent to 19.99 percent variable, expect to get the highest APR if you don’t have a previous credit history. However, you can get that rate reduced by up to 2 percent by keeping good credit card habits like paying on time and staying under the credit limit.

The Discover Student More Card comes with 5 percent cash back in rotating categories, which change every three months (however, capped at $300 in charges every three months). For other purchases, the card offers 0.25 percent cash back up to the first $3,000 in purchases and 1 percent after that. The advertised APR on purchases ranges from 12.99 to 20.99 percent, again, however, students with a limited credit history can expect to end up paying the highest APR.

Both cards offer the convenience of having a credit card and can be extremely useful for starting to build your credit history. As mentioned above, however, like most other credit cards directly targeting college students, they become very expensive if not used right. Cash advances for both come with a $10 fee and accumulate interest at a 23.99 APR variable rate for the Discover student card and 25.24 percent for the Citi Forward card. Make one late payment, and the APR for future purchases jumps to 18.99 up to 25.99 percent variable on the Discover Student More card, and up to 29.99 percent for the Citi Forward card, and according to card terms, may stay there indefinitely for future purchases.

Because of their high interest rates, these cards are most useful not for carrying credit card debt, but for stepping stones for building your credit history. Pay the card on time, pay balances in full each month (or at the very least keep credit card balances at less than 30 percent of the card limit), and otherwise follow the basic guidelines for building a good credit score. With these good credit habits, in as little as 6-12 month, you may be able to qualify for credit cards with lower interest rates and otherwise more favorable terms. It also helps to open a checking and savings account, preferably with the credit card lender you eventually want to do business with.

1. Look to the future. Before applying for a student credit card, keep in mind that credit cards are not just a tool for spending; they are a vital key to your financial future. Taking out one or more credit cards will help build your credit history; and in today’s economy, a strong credit history carries more importance than ever. Laying the foundation for a solid credit record now will provide you with far better financing prospects down the road when it comes to borrowing money for a car, a house, or even starting a business.

2. Stay clear of 0 percent APR balance transfer offers. Many student credit cards advertise 0 percent APR introductory offers, which typically expire after three to six months. While it’s tempting to take out a 0 percent APR balance transfer to get a little extra cash, resist the temptation, unless you are positive that you can pay off the balance before the introductory period expires,. Debt not paid off by the end of the 0 percent APR introductory months will accrue interest at the regular rate, which can run as high as 23.99 percent.

3. Look for cards with low purchase APRs. Purchase APRs on student credit cards range quite a bit, from e.g. 12.99 to 23.99 percent. When selecting a credit card, look for the cards with the lowest purchase APR to ensure that you pay the least amount of interest on balances carried forward on the card.

Unfortunately, for new credit card applicants it’s not as easy to get approved for the credit cards with the lowest interest rates; card issuers tend to reserve the best credit card deals for people with some previous credit history. However, start applying for the lowest interest student credit cards; and, if you don’t get approved, try for a higher interest card. Once you’ve used that card responsibly for six to nine months, apply again for the low interest credit card. The credit record you’ve built in the meantime may be sufficient to get approved the second time around.

4. Consider rewards credit cards. Students rewards credit cards can offer extra perks, such as cash back bonuses or rewards points, which can be redeemed for plane tickets, iTunes purchases, or travel. However, rewards credit cards also often come with higher interest rates, so for cardholders carrying a balance from month to month, the accrued interest will quickly surpass rewards earnings.

5. Pay credit card bills on time. Once you receive a student credit card, the focus shifts to good credit card management. While paying phone bills or utility bills late from time to time is no big deal, there are numerous negative consequences from paying credit card bills late. Firstly, paying even one day late will result in late fees, which run as high as $39. Secondly, regular payment habits are one of the most important factors credit rating agencies take into account when evaluating your credit record. Payment history makes up about 35 percent of a person’s FICO score, so paying on time is essential to build a solid credit history.

6. Keep credit card balances low. To avoid paying interest, ideally pay off the credit card balance in full every month. If you have to carry a balance forward, keep it below 10 percent of the total credit line, and never above 30 percent. This may seem counterintuitive to new cardholders, since obviously, you took out a credit card to make use of the credit line. However, carrying a balance forward from month to month can easily start you down the slippery slope to mounting credit card debt. Just as bad, keeping balances above 30 percent of the credit limit will detract from your credit score, and hurt your financial prospects in the future.

7. Plan ahead. To ensure that you always have enough money to pay your credit card bills, keep money in a checking or savings account. Keep track of credit card charges, so you don’t spend more money than what you have in your accounts. Also keep in mind that unexpected expenses will crop up; so add a cushion to your budget for emergencies and incidentals.