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8 keys to safe credit, debit card use on campus

By Dana Dratch
Published: August 22, 2014

Want to put a little extra spending money in your pocket this semester?

If you are taking debit or credit cards to college, following some smart tips can make the difference between a few extra pizzas and a pile of bills.

From the best deals on bank accounts to financial security in the dorm, here are eight things you need to know:

8 keys to safe credit card use on campus

1. You can save big bucks by shopping banks
Do not automatically apply for a campus debit card. Instead, shop around for a bank account and debit card you can use on campus.

"A lot of these campus debit cards come loaded with fees -- even 'per transaction' fees," says Joe Ridout, consumer services manager with Consumer Action. "Just because the school promotes a card doesn't mean that card is the best one for you."

A February 2014 Government Accountability Office study found that while campus card fees were generally in line with cards offered by banks, not all card issuers were forthcoming with information.

"Shop around and don't take it on faith," says Chris Lindstrom, higher education program director for US PIRG, which issued a 2012 study that criticized campus debit card fees. "For as many deals [as] we found [that] were good, we found campuses where students could have gotten a better deal down the street."

2. You have a choice with overdraft fees
Normally, your debit card will be refused if the purchase takes your account below $0. But if you give the bank permission to charge overdraft fees, the debit card will keep working even after you are out of money. And you will get charged a fee -- often about $35 -- every time you use the card, says Chi Chi Wu, staff attorney with the National Consumer Law Center.

"With debit cards, the biggest problem is the overdraft fees," Wu says.

Almost half (46 percent) of 18-to 25-year-olds are charged overdraft fees, according to U.S. PIRG's study. And 61 percent of the overdrafts were for purchases, not ATM withdrawals. Fifteen percent of college-age consumers paid 10 or more overdraft fees each year -- more fees than any other age group, the study found.

Banks and financial institutions need your written consent in advance before they can allow your account to dip below zero and start charging overdraft fees. Wu suggests declining that option, or revoking your consent if you have agreed to it in the past.

3. It is easier than ever to track purchases and receipts
If you use your debit card daily, it is even more important to know exactly how much money you have in your account. Three free options for keeping tabs include:

  • Apps and online offerings from your own bank or credit union.
  • Websites such as Mint.com that allow you to integrate and track finances.
  • The "notes" function on your phone.

No matter which option you choose, recognize that not all purchases are deducted from your account the minute you make them. Some may take several days, or even a week, to clear, says Michelle Dosher, managing editor for the consumer education department of the Credit Union National Association.

4. You can hurt your parents' credit
If you run up a balance you cannot pay on your parents' credit card, you are potentially hurting their credit scores, says Dosher: "It's your parent's credit that's on the line."

Want to avoid problems? Have a talk with Mom or Dad to spell out exactly what the card is meant to cover, says Dosher. If they use fuzzy terms like "for emergencies," get specific and have them spell out exactly what constitutes a card-worthy emergency.

There's a lot of marketing of 'student cards,' and then there's what's good for students. And they're not necessarily the same thing.

-- Joe Ridout
Consumer Action

5. You have free access to your credit history
At least once a year, pull all three of your credit reports and make sure everything is accurate, says Anthony Sprauve, spokesman for myFICO, a division of FICO. If you've never managed credit before, the likelihood of you even having a credit report is small. But if you've got a student loan, odds are that's in your report.

You are entitled to pull your credit reports from each of the big three credit bureaus -- Equifax, Experian and TransUnion -- for free annually through AnnualCreditReport.com. You often have to pay to view your credit scores. However, some credit card companies, banks and credit unions provide scores for free as a customer service.

Sprauve says the keys to building a good credit score are:

  • Paying on time
  • Keeping your monthly usage to 20 percent of your available credit line or below
  • Paying off the entire card balance every month

"You don't need multiple credit cards to have a good score," he says. Instead, Sprauve suggests getting one good, all-purpose card, using it and paying it off judiciously.

6. You probably can get a credit card, but maybe you're not ready for one
Years ago, enrollment in college almost guaranteed you a credit card. "The Credit CARD Act changed that," says Dosher, referring to federal credit card legislation signed into law in 2009.

Now, if you are under 21 and want a card, you either need verified income (enough to pay the bill) or a co-signer. "Credit card companies are allowed to consider grants and loans" as income, as long as a student is receiving an amount greater than the tuition bill, says Wu.

But even if your loans and grants cover more than tuition, that is not exactly disposable income. You still need to do other things with the money. Such as buy books. And eat. So while you may qualify, it is often smart to stay out of the credit card arena until you have actual disposable income to dispose of.

7. 'Plain vanilla' cards are preferable
If you do have some disposable income, opt for a general use credit card with no annual fee that has good terms and a low interest rate, says Ridout. Remain skeptical of "student cards," he says. "There's a lot of marketing of 'student cards,' and then there's what's good for students. And they're not necessarily the same thing," Ridout says.

Instead, shop for the card that best suits you, he says. That probably means a general-use card (not a retail store card), with a low interest rate and no annual fee. "For a student, there's absolutely no reason to be paying an annual fee," Ridout says.

8. Limit potential ID theft
In a dorm, you share a communal environment with little space and less privacy. Safeguard your cash, debit cards, credit cards and personal financial information. Also, use private devices and access banking information on secure networks.

Never write down PINs or passwords. Force yourself to log in to financial sites each time rather than saving passwords or logins. You do not want your bank or card pages to pop up if someone trolls through your phone or surfs on your computer. And devise a secret hiding place for your debit or credit card.

"You just need to recognize that it is money," says Ira Rheingold, executive director of the National Association of Consumer Advocates.

See related: 4 reasons why college kids need a credit card, A look at student credit cards