With the Credit CARD Act of 2009, the rules for issuing and receiving student credit cards are drastically overhauled. Credit Cards University will stay close to these changes and monitor how they affect the student credit industry, directly and indirectly.

What are Credit Card Rewards?

One of the latest marketing ploys in this market is credit card rewards, which are bonuses for credit card holders who spend certain amounts of money. For example, the Citi mtvU Platinum Select Visa is geared toward college students and allows holders to earn five “thank-you” points for every dollar spent at certain establishments.

Are Rewards Good for Students?

Many wonder whether reward credit cards are the right choice for students who are just starting college. Student rewards credit cards might look like advantageous deals, but in reality they can land students in real hot water. Many students will see the benefits of the rewards-concert tickets, restaurant gift cards and airplane tickets and believe that they should rack up their entire credit limit just to get the most rewards. The real cost of credit cards isn’t apparent.

What Are the Pitfalls?

It is important for students to understand the negative effects of racking up too much credit, even when enrolled in the best credit card rewards program. For one thing, you’ll be paying interest on whatever balance you cannot pay back each month, which can amount to thousands of dollars more than what you actually purchased. For another, many student rewards credit cards charge annual fees on top of the interest rates. This depends on how much you intend to spend with your card. Many of these credit cards come with expiration dates on the points you earn, so if you don’t use your points within the time limit, you lose them. Again, this encourages students to spend as much as they can in the shortest amount of time possible.

Let’s look at the Citi Bronze AAdvantage MasterCard, with which you earn one AAdvantage mile for every $2 you spend with the card. However, they impose a cap of 25,000 miles in a year, and to get that many miles, you’d have to spend $50,000 over a 12-month period. Even if you manage to spend that $50,000, 25,000 miles isn’t as much as you might think. It will probably buy you a single round-trip ticket anywhere in the United States, but you had to spend $50,000 in order to get that single ticket.

How Do You Make the Final Decision?

When making your final decision, consider both the advantages and disadvantages of student credit cards with rewards: Earning those rewards points on student credit cards might seem like a lot of fun, but in the end you could do lasting damage to your credit. Even cards that offer cash back and other bonuses will make you spend a large sum of money before you benefit from your spending.

Steve Thompson

Wake up! When’s the last time you checked your credit card’s interest rate? The good folks at Frontline have released essential reading for students considering getting into the credit card game as well as anyone else who uses plastic to buy things their bank account cannot afford. This Frontline report is a real eye opener; it reveals eight things every credit card user should know. Well, that’s the title, but in reality there more than just eight things about credit cards that consumers should know.

One of the most important credit card lessons that can be learned is the importance of universal default. What is universal default? Universal default gives credit card companies the right to raise the interest rate on your credit card—not because you were late with a payment to them—but because your house payment was one day late or your student loan payment got lost in the mail or your car payment was delayed due to an emergency. The credit card industry was essentially granted nearly unlimited authority to raise your already interest rate without cause and without even informing you of their decision in plain English.

The second most important lesson to be learned from this Frontline report is to read the fine print on your credit card statement. Of course, there is a fine line between reading and comprehension, and unless you are a lawyer, you may as well allow your dog to translate the fine print of credit card contracts for you. You do not have the right to take a credit card issuer to court to resolve disputes; you don’t even have the right to a class action suit. Instead, all disputes with a credit card company must be resolved through the process of arbitration. If there are two interest rates on the account, guess which one the payments will go toward paying off first? Yep, the higher interest rate will continue to accrue forever, or for at least as long as the lower interest rate is not paid in full.

Among other elements of Frontline’s report worth considering are the fact that there is literally no cap on the amount of interest a credit card issuer can charge, and laws were changed under the Bush administration that create more difficulties in discharging massive credit card debt by filing for bankruptcy.

Even the best student credit cards have pitfalls. Don’t forget: Choose wisely, and use wisely.

Timothy Sexton

On “Greek,” a television series dealing with college life, a student named Ashleigh (Amber Stevens) tried to solve her financial woes by applying for a student credit card. On-campus recruiters made it all too easy for her to get an instant line of credit, and when Ashleigh quickly maxed out her card; the bank simply doubled her credit line.

Predatory lending practices like these led the Federal Reserve Board to recommend some sweeping credit card industry reforms in May 2008. Although the FRB recently approved these regulations Dec. 18 to provide credit card help to consumers, they won’t go into effect until July 1, 2010.

New Credit Card Rules for Lenders

Within the next 18 months, banks and other lending institutions will have to adhere to the following guidelines:

No More “Double-Cycle” Billing

Most credit card users carry a balance from month-to-month, but some lenders were charging interest based on the previous two billing cycles. Unless you paid off the balance on cards like these, each month, the lending institution could charge interest on a balance you already paid. The Fed’s new rules will put an end to this “double-cycle” billing.

Interest on Credit Card Balances

Even with a good credit score and an excellent payment history, credit card companies could arbitrarily raise the interest rate that they charged on existing balances to as high as 29 percent. The new credit card rules approved by the FRB will only allow interest rate increases if a payment is over 30 days late.

Reasonable and Fair Payments

In order to avoid a penalty, you sometimes have to immediately mail a payment to the credit card company. The Federal Reserve’s new credit card rules make sure that cardholders have a reasonable amount of time to make a payment.

Universal Default

In the past, creditors reserved the right to review your payment history on all your credit cards, raising your interest rate if they saw late payments or defaults on other cards. The Fed’s ruling eliminates this policy, which is known as universal default.

The Negative Side of Credit Card Help

Because banks, credit unions and other financial institutions have 18 months to get in compliance with the Federal Reserve Board, they have plenty time to make up for the revenues they stand to lose once the new guidelines are in place. It’s possible for credit card issuers to raise their interest rates for all consumers, not just applicants with low credit scores.

For college students graduating after July 1, 2010, the reforms also could have a negative impact. In an article written by CNNMoney.com staff writer Jessica Dickler, American Bankers Association spokesman Peter Garuccio said that low introductory offers and zero-percent balance balances are likely to be scaled back.

Safeguarding Your Credit History

Like a resume, your credit history tells a lender about both your spending habits and your ability to repay your debts. Even with the FRB’s credit card help on the horizon, it’s important to use common sense when applying for a credit card, especially if you are an undergraduate:

· Make sure to read any application for credit thoroughly, double checking things like late fees and how much your interest rate can increase if you miss a monthly payment.

· Use your card wisely and don’t pull out the plastic for things like beer and chewing gum, as Ashleigh did on “Greek.”

· Sit down and work out a budget, which should show how much you can afford to pay on your credit card each month.

Steven Bryan

To a student, future may seem bleak. Will there be a jobs available? Will they pay enough to survive? The best way to be prepared is to not go into the job market already burdened. And since so much debt originates from this time of year, having a responsible holiday season is the place to start.

University blogs have been busy with great ideas for gifts and even better advice for shopping. Below is a round-up of our favorites.

Stonybrook University put together a wide swath of helpful tips for a safe online shopping experience. The advice covers a broad range of topics and laid out as a checklist of safety:

• What to be watchful for while using your credit card online
• What to do if you’re a victim of fraud or encounter problems with the online store
• Links to extra resources for more information

The Student Money Management Center at the University of North Texas put together a Top 10 list for “surviving the economy this holiday season“. Individually each point is a good idea, but together these tips become a necessity of a wary economy.

North Carolina State’s “Enjoying the holidays without going broke” is very thoughtful and inspiring. Writing for the Family and Consumer Sciences NC Cooperative Extension, Christine W. Smith covers gifts that can be inexpensive…and life-changing: Making gifts, helping those in need, and forgiving past grudges—what the spirit of the holidays should be about.

In the same vein, but less egalitarian, come practical recommendations from Texas A&M. “And may all your Christmas budgets be in the black” from Kathleen Phillips gives practical advice for creative gifts and not overspending, including: Making gifts, teaching a loved one a new skill, and committing to spending time together.

On the positive side, this economic crisis will force us to control our spending and reel in our materialism. Some say this is long over due, evidenced by the large amount of credit card debt the average consumer carries. More credit cards is not the answer, but a smart selection from the best student credit cards can make a difference.

Our many resources include:

• Questions and Answers
  We answer difficult questions and give advice about pitfalls and situations that students can ecounter.
• Credit Card Blog
  We keep an eye on the credit card industry and credit cards in the news. We’ll report on relevant credit card stories and reflect on how they can affect credit card users.

The credit landscape, although constantly changing, still has the same principles: make your payments, don’t max out your credit and don’t spend more than you earn.