photo credit: michael_swan

With school starting up, credit card companies are licking their lips in anticipation of a new wave of credit card customers.  According to a 2009 Sallie Mae study, 84% of college students have credit cards, with an average balance of $3,173, and only 17% pay off their balance each month.  That means lots of lucrative fees and interest payments for the banks.

If you’re heading off to school, don’t become one of their victims.  Instead, follow these tips to win at their game.

Don’t let them sell you

Despite their smiling faces, banks aren’t trying to help you, they’re trying to make money off of you.  Don’t make it easy on them.  Even though the CARD Act is supposed to prevent them from handing out goodies in exchange for card applications, they may still try, so make sure you pass on the freebies. That Citibank keychain could end up costing you. Instead, take control of the process, do your own research, and find a student credit card on your own terms.

Also, keep temptation out of your mailbox by opting out of credit card junk mail, since these offers tend to be some of the worst. Try www.optoutprescreen.com or call 1-888-5OPTOUT.

Credit cards are not fake money

The key to understanding credit cards is understanding the word ‘credit’ – that means that no matter how easy it is to buy things you can’t afford, it’s still your money and you’ll still end up paying.  Your first credit card will have a low credit limit, but don’t think of this as a limitation, think of it as less rope to hang yourself with.

Minimum payments are designed to keep you in debt

Credit card companies calculate minimum payments in a manner that is intended to decrease over time, so that you incur maximum interest charges for the bank’s bottom line.  By some estimates, if you have a $1,000 charge and only pay the minimum each month, it could take you 9 1/2 years to pay off, and cost you an additional $900 in interest.

Instead, automate the process and pay a constant amount each month that’s higher than the minimum.  Your balance will go down faster and you won’t spiral into interest payment purgatory.  While you’re automating, set up email alerts for when your bills are due. Late payments not only incur huge fees, but the bank will hike up your interest rate, and these added expenses can push you over your limit without you realizing, which means more fees.

You’re gonna need a cosigner

The CARD Act dictates that anyone under 21 who doesn’t have proof of adequate income will need an employed co-signer.  Since this will generally be your parents, it might make sense to avoid student credit cards altogether and see if you can get lower rates and higher rewards by becoming an authorized signer on your parents’ account.  Just make sure you’re responsible, so they don’t end up regretting it.

Be skeptical

Don’t assume that credit card marketing claims are true, like “0% APR”, “5% Cash Back”, or “No Fees.”  There’s always a catch, so look out for landmines in the fine print.  And consider joining a credit union.  You may have one on campus, and they’ll generally have lower rates, lower fees, and much better customer service than a big bank.

If all this is a bit too much to digest, and you’d rather just have someone else do your homework for you, check out a credit card search site like NerdWallet, and find the best student credit card for your needs.