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College students: Tips for managing credit

Piling up debt during your college years is alarmingly easy. Credit card issuers often employ persuasive marketing techniques to get students to open accounts. Once students have credit cards in hand, the temptation is so great that many end up graduating with not only a diploma, but significant consumer debt.

That doesn't mean college students should shun credit cards completely, says the Maryland Association of CPAs.

Used properly, credit cards can be beneficial in establishing a credit history and providing aid in emergency situations. And, believe it or not, it's often easier to get a credit card while you're still a student. That's because credit card companies know that once you've graduated, Mom and Dad are less likely to come to your aid if you can't meet the payments.

Here's what CPAs say college students need to know about credit cards.

One is enough: There's little reason for a college student to have more than one credit card. In fact, having too many credit cards can work against you when it comes time to buy a car or rent an apartment. That's because some lenders may be reluctant to extend additional credit to you out of fear that you'll run up balances on all your open credit cards and be unable to meet the payments.

Select your credit card wisely: Credit card interest rates and terms vary widely. Look for a card with a low interest rate and no annual fee. To avoid interest charges, you'll want a card with a grace period of at least 25 days. A grace period lets you avoid finance charges by paying your balance in full before the due date. And be sure to read the fine print covering fees for late payments, exceeding your credit limit, cash advances and overseas transactions.

Be wary of low teaser rates: Some credit cards have low introductory rates that jump sharply after three or six months. On other offers, lower introductory rates apply only to balances you transfer from another credit card. And beware: Some credit card issuers will raise your rate if you're late on a payment.

Don't charge what you can't pay back each month: Except when absolutely necessary, you should never charge more than you will be able to pay back when the bill arrives. Before charging a purchase, think it through. If you are not able to afford the purchase now, chances are you won't be able to afford it in a month when the credit card bill arrives.

Lay low with your credit limit: A low credit line limits the amount of credit you have access to and helps to remove the temptation to overspend. Should you receive a congratulatory letter raising your credit limit, call the credit card issuer and decline the offer.

Avoid cash advances whenever possible: Many card issuers impose both finance charges and transaction fees for cash advances. Unlike charge purchases, interest on a cash advance is normally charged from the transaction date and the cash advance fee may be as high as 2.5 percent of the amount taken.

Protect your account number: Don't give your account number out over the Internet or elsewhere unless you initiated the transaction. Keep separate from your card a record of your account numbers, expiration dates, and the phone numbers for each issuer. Contact them immediately if your credit card is lost or stolen. Be sure that you open credit card bills promptly and check for unauthorized transactions or billing errors. If you see fraudulent activity, notify your issuer immediately.

Check your credit report: CPAs suggest that you check your credit report at least once a year to be sure it is accurate. What's in your credit report can determine whether you can get a car loan, rent an apartment, or even get hired for a job.

Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.

Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.

For CPA referrals in your area, contact the MACPA at (410) 296-6250 or click here.

The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.