Freshpeople: Be Smart About Credit

The new students have arrived at UC-Berkeley, closely pursued by hordes of credit card marketers. Right by my office is a bank that literally has 12 employees out front hawking credit cards and new accounts.

Freshman friends, don’t get your first credit card from the guy on the street offering you a t-shirt or worthless, plastic (likely lead filled) bauble. Be smart about credit. Credit is an incredibly powerful consumer tool, but you must wield it carefully. If you ruin your credit, you will have difficulty in life getting a job (people with bad credit look like embezzlement risks to employers), starting basic utilities (like cable TV), and buying a home. You are not the federal government. You must live within your means. And yes, deficits DO matter!

The most heavily marketed and easiest credit products to adopt are often the worse for you. These are cards with high interest rates and fees packed “to the back” of the card, meaning that the fees are hidden. So, they may have no “annual fee” but if you decide to pay by phone, or if you’re a millisecond late in your payment, expect outrageous penalties.

Remember that the credit cards with your college logo are “affinity cards.” Your college gets a cut from those cards, and unfortunately, this profit motive causes many schools to market less than advantageous cards to their own students.

If you’re going to get a credit card (and you should in order to start building your credit file), educate yourself and shop around. First, you should understand the concept of compound interest. Second, you should understand that if you only make minimum payments, you are at risk of being in debt nearly forever. has a calculator that will help you understand that minimum payments equals maximum indebtedness.

One of the best guides to acquiring a good credit card is’s Credit Card Search. Another incredible resource is Consumer Action’s Annual Credit Card Survey. Good luck, and don’t allow the miracle of instant credit to bankrupt you!