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Headed for College : Selecting a Credit Card

A credit card can be an incredibly useful financial tool – so long as you use it wisely. Here are a few ways a card can be of use:

Building good credit
You buy things, and then you pay for them – it’s really a simple concept. No matter what anyone tells you, the best way to build good credit is to pay your card off every month, in full. If you’re doing this, high interest rates won't matter, since you won't be paying interest anyway.

For convenience
Having a credit card is much easier and safer than carrying large amounts of cash with you. If you plan to pay the balance in full every month, look for a card with no annual fee and a 20- to 30-day grace period. You might, however, opt to get a debit card attached to your checking account. It won't allow you to build credit, but it won't allow you to build debt either.

For the freebies
Some cards allow you to build points with every purchase towards free merchandise or airline miles. Be aware that these cards usually have a large annual fee and a high interest rate. You might be better off buying whatever freebie you're trying to earn.

To carry a balance
Like we said, it's not a good idea to carry a balance on a credit card. But if you’ve already got one, find a card with a low interest rate, then see what the annual fee is and how much they charge for balance transfers. Then figure out how much you will save in interest using the Cost of Credit Calculator. If you can save more in interest than you pay in fees, it's a good deal. If not, keep looking. Either way, pay off that card. Soon. Today, if possible. Because if you don’t, you’re digging yourself into a deep, deep hole.

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