A Crash Course in Credit Cards for College Students

The immediate gratification of putting an iMac, tickets to a Coldplay concert, and nights of bar hopping on plastic tends to have a bad habit of coming back to haunt college students post-graduation.

Despite a lack of credit history and sizable sums in student loans, most college students can get their hands on plastic with as much ease as a card swipe. And they're often lured into doing so with prizes like free T-shirts. Along with the freebies, however, come some not-so-pleasant surprises: high interest rates and a range of fees and penalties. One reckless night of spending or late payment can leave students with overwhelming debt and a damaged credit score — factors that could hurt their chances of landing a job or an apartment post-graduation.

Unfortunately, many graduates know this all too well. More than three-quarters of undergraduates hold credit cards, according to student-loan provider Nellie Mae. Their average debt load: $2,169. However, that amount is nothing compared to the 10% of students who graduate with more than $10,000 in credit-card debt, according to a 2008 survey commissioned by credit bureau TransUnion's credit management web site TrueCredit.com and conducted by market research company Zogby International.

"[College students] don't realize that anything they do now will stay on their credit report for the next seven to 10 years," says Thomas Fox, community outreach director at Cambridge Credit Counseling Corporation, a debt-management agency.

To graduate with honors in credit-card management, here's what students need to know.

TrueCredit.com's survey found that four out of 10 consumers sign up for a credit card to receive a free gift or special offer. That's a huge mistake. Even though the school's logo may be on the free T-shirt or baseball cap, these credit cards may not serve in a student's best interest, says Fox. In fact, some universities even receive money from credit-card companies in exchange for allowing them to pitch their cards on campus, warns Daniel Ray, editor in chief of CreditCards.com.

Make sure to compare a credit card's terms to other offers by going to web sites like CreditCards.com and LowerMyBills.com.

Here's a sampling of some of the better deals currently available to students: