The pitfall of using credit cards is the mass accumulation of debt that cannot be paid. It does not take many students long to accumulate large debts because they often charge so much that their monthly payments are too high for them to make payments larger than the minimum required. 

What students do not realize is that with annual interest rates of 18 percent and higher, most of each of their minimum payments is applied to the interest on the debt. Because so little is applied to the debt itself, the balance stays large for a long time. When students are unable to make the minimum required monthly payment, their credit is affected. Each month credit card companies report the payment status of credit cards to credit bureaus such as Equifax, Trans Union, and TRW. 

A negative credit report reflecting late payments or the existence of unpaid balances could affect your ability to obtain credit at reasonable rates. In other words, you do not have to file for bankruptcy to develop a bad credit rating. As a matter of fact, having too many credit cards can negatively your credit rating. When you apply for an auto loan or a home mortgage, financial institutions review your credit report to determine how many credit cards you own and your credit limits (the maximum amount of credit provided to you by all of your cards). Even if you pay your credit card balances promptly, you could use the cards for purchases beyond your ability to make payments on both the cards and new loan. A banker might think that your prompt payments indicate that you could be more concerned with paying off your credit cards than your auto loan. 

The potential of college students to misuse credit cards has encouraged the administration at certain universities to ban on-campus solicitations. 

Here are some tips to help you reduce the adverse effects of credit cards and some tips on what to look for when deciding which credit card issuer to use. 

1. Be suspicious of card companies offering low introductory rates. Often times the low rates last only the first three months after which they become higher. The average credit card rate is over 15%.

2. Obtain a card that has no annual fee. Credit card companies are paid a percentage from the vendors every time you buy something. Therefore many credit card issuers waive the annual fee.

3. Avoid credit cards offering high limits (Gold Cards, Platinum Cards). Although ego boosts, cards with high limits create a greater potential to spend.

4. Limit the number of credit card applications you will fill out. Each time you fill out an application you give the credit card issuer the authority to inquire into your credit report. These inquiries, called hits, are recorded. Your credit report contains every institution that ever evaluated your credit history. Suspicion about your credit worthiness is created when a credit card company inquires about you worthiness but for some reason does not issue its card. Nothing is more negative than an inquiry on your credit without the subsequent issuance of a card.

   So think twice before you fill out that credit card application for a free tee shirt or mug. Also restrain from taking advantage of those department stores and specialty stores offering you a discount for opening a charge account.

5. The best way to use a credit card is to use it only when you can pay off the balance at the end of the month. 

Using these tips and spending restraints allows you to maximize the use of your credit card and to avoid credit problems.