Student Credit & Money Management Services - Iowa Memorial Union: The University of Iowa

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Student Credit and Money Management Services

Credit Cards / Choosing Your Card

Why get a credit card?

Why get one if you can end up racking up thousands in debt? Because it's useful to have a credit history. Without a credit history, it can be hard to rent apartments, buy a house, rent a car, or even get some jobs.

How do I pick?

Good reasons for choosing a Visa, Mastercard, or American Express card

You don't already have one of these cards.
It offers the lowest interest rate you can get. (How do you know what that is? Call a company after you get one of its offers, and ask.)
No annual fee.
A long grace period -- the time lenders give before they charge interest on your purchases. The longest grace periods run 30 days; the shortest are around 20.

Bad reasons for choosing a credit card

The picture on it is pretty.
Your other cards are maxed, or you're afraid they will be soon. (If this is the case, see the Using Credit page for tips on how to get out of this jam.)
The ad says you can get an enormous credit line. (When are you planning on paying off an enormous debt?)
You like the sound of "Platinum."
You figure you might need another card sometime.
You're flattered they asked.

Don't worry about incentive programs -- cashback, free stuff -- until you've established a record of paying off your balance in full. If you carry a balance, choosing a card based on incentives and "free gifts" is like buying a car to get a bag of M&Ms.

OK, I got a credit card, but the car dealership says I still need a cosigner because I don't have enough credit history. Isn't my Visa history enough?

Unfortunately, these days one card is often not enough for building that history. Most advisors recommend three. Save yourself some potential debt by making those other cards clothing-store or gas cards, good only at those retailers. To stay even safer from debt, leave all your cards home unless you're planning to use them, so they don't become a temptation.

Whichever cards you choose, remember the idea is to establish a clean credit rating. How do you do that?

ALWAYS PAY at least the minimum ON TIME.
Do use the card occasionally, but keep your balance low, or better yet, paid off each month.

Why shouldn't you have more than one major credit card, in general? The more cards you have, the more it looks like you might get in over your head -- and this is an important part of the equation used to figure out your credit rating. You can read more about this in the section Improving Your Credit Rating.