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Today's lesson: plastic
10 steps for students who want to handle credit wisely

1. Always remember that credit is a loan. It's real money that you must repay. Before you apply for the first card, decide what the card will be used for -- Emergencies only? School supplies? -- and determine how the monthly bills will be paid.

2. Go slowly. Get one card with a low limit and use it responsibly before you even consider getting another.

3. Shop around for the best deal. Try Bankrate.com's most recent survey of student credit cards.

4. Study your card agreement closely, and always read the fine-print flyers enclosed with every bill. Credit card offers differ substantially, and the issuer usually can change the terms at will with 15 days' notice.

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5. Try to pay off your total balance each month. Just paying the minimum is a trap: If you try to pay off a $1,000 debt on an 18 percent card by just paying the minimum each month, it would take more than 12 years to repay.

6. Always pay on time. A single slip-up will place a black mark on your credit record -- and could cause the card issuer to jack up your interest rate to the max.

7. Set a budget, follow it closely and watch how much you're paying on credit. A good rule of thumb is to keep your debt payments below 10 percent of your net income after taxes. So if you take home $750 a month, spend no more than $75 a month on credit.

8. Keep in touch with your issuer by notifying the company promptly when you move. In the event you must be late on a payment, call before it's late. Card companies want your business for life, so they may be willing to make alternate payment arrangements that won't leave a mark on your credit rating.

9. Close accounts you aren't using. Having available-but-unused credit can count against you when it comes time to buy a car. That's because lenders don't like it when you have the ability to quickly go deep into debt.

10. At the first sign of credit danger, such as using one card to pay off another, make the card harder to use. Only carry it when you plan to use it, lock it up in an inaccessible place or entrust it to your parents.

-- Updated: Sept. 26, 2003

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See Also
Checking up on your credit card
8 ways to save on credit card penalties
Take charge of your cards
More credit card stories

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Don't get trapped by card debt. Learn to use it wisely.
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