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College and credit

Dear Dr. Don,
What do you think is the best credit card for me to get? I am currently a student in my last semester looking for a card to float me through the end of this semester. I am willing to make the minimum payment each month and then begin to pay off the balance when I am out of school and working.
Please help!
Chaten Collegian

Dear Chaten,
I'd rather see you take out a student loan then to finance your college expenses with credit card debt. Your ability to take out a student loan after the semester is under way and you've paid your tuition may be limited. Talk to the nice folks at your school's financial aid office to see what's available.

Paying 4.06 percent on a Direct Student Loan with a 10-year repayment plan and deferment options if you go back to school or have a period of unemployment is a lot better than paying 14 percent to 20 percent on a credit card issued in an on-campus promotion. A Direct Student Loan doesn't have prepayment penalties and you could pay it off as rapidly as you would pay down a credit card.

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If that won't work for you, then you can shop for credit card rates on Bankrate. There is even a special category for student cards. Credit card companies use your credit history to estimate the risk they face in extending you credit. They'll review your credit report and get a credit score based on that report to help decide both the credit line and interest rate on your account. Applying to a lot of different companies actually hurts you in getting approved because the applications show up on your credit report and stay there for two years. Limit your credit applications to one or two firms.

You may not have a credit history and will be looking to build one through this card. If that's the case, a student card is likely to be your best bet. That's because the card is targeted to and priced for students with a limited credit history. Get a copy of your credit report and credit score to see where you stand. Bankrate provides the contact information for the three major credit bureaus. While you're at it, check out "How do I find a better credit card?" on Bankrate's credit card channel for more information.

-- Posted: Feb. 12, 2003

Read more Dr. Don columns
See Also
Student loan rates at record lows
Credit cards for teens and students
20 credit card company tricks
Financial advice glossary
More Dr. Don stories

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