Student Rewards Cards: How to Choose a Good Deal

Attention college students! The credit card companies want your business so badly that they're piling on the perks and rewards.

Getting a nifty reward after charging your books, tuition, and other essentials of the student life on a credit card can be a real kick.

Who couldn't use a little extra cash or a new iPod or a free flight to anywhere in the world?

But to make a student rewards card truly a rewarding experience, you'll need to study the offer carefully.

Some cards offer rewards that are only so-so at best. And other cards offer such skimpy rewards terms that it will take you a very long time and a whole lot of credit card charges before you earn a decent reward. Who has the patience for that?

Here are some important questions to ask before signing up for a rewards card.

How good is the reward? Many student rewards cards let you earn cash back. And a little extra green is always welcome. Some cards let you earn as much as 5 percent cash back for purchases you make at gas stations, restaurants, clothing stores and even paying your cable bills. Let's say you charge $100 at a clothing store on a card with a 5 percent rebate.

That $100-purchase would earn you $5 cash back. That's a pretty good deal. But be aware many student rewards cards only offer the 5 percent rebate for a limited number of months. And other cards only offer the 5 percent rebate for specific purchases, such as gas.

The more typical cash rebate is 1 percent. Spend a $100 on a credit card with a 1 percent rebate and you'd earn just $1 cash back. So you'll need to do some serious charging before you earn a decent reward. With a card with a 1 percent rebate, you'd need to spend $2,000 to earn $20 cash back.

Other rewards cards let you earn points that you can redeem for items such as iPods, televisions, laptops, phones, airline tickets, and hotel stays. The larger items such as laptops take more than 100,000 rewards points to redeem. Even with a card that offers a 5 percent rebate, you'd have to charge more than $20,000 to earn enough rewards points for a laptop. That's an awful lot of money.

How easy is it to cash in your rewards? Some cash-back cards will automatically add cash to your card account once you meet a rewards goal. How quickly will a card allow you to redeem your rewards total for cash or other items? What steps will you need to take to cash in a free roundtrip airline ticket? Are there blackout dates? How soon can you schedule a free trip with an airline?

When do your rewards points or miles expire? Will your rewards points expire after a year? Five years? Some cards offer reward points with no expiration dates. Be sure to check.

Does the card come with annual fee? Not all student rewards cards are free. Some cards come with an annual fee. Paying a $29 fee each year isn't cheap. So be sure to factor in the cost of an annual fee when choosing a rewards card.

What's the card's annual percentage rate? Interest rates on student rewards cards range from 14 percent to 16 percent. The higher the APR, the more you'll be charged in finance charges if you carry a balance. To get the most value out of rewards card, you'll want to pay your balance in full each month. Hefty finance charges will more than offset any rewards you're likely to earn with the card.

Does the card come with low-introductory rate? Many student rewards cards sweeten the deal by offering a rock-bottom introductory rate. How good are these deals? How does paying zero percent interest for six months sound? If you do plan on making some big purchases with the card -- say, buying a new computer or your books for the semester -- why not make those purchases during the six-month introductory period? That way you'll have plenty of time (six months instead of one month) to pay off that big balance completely, without paying a penny in interest. If you have a balance after the introductory period ends, you'll be stuck paying finance charges on the remaining balance.

What are the card's penalty fees and rates? The quickest way to lose the value of a rewards card is to pay late. The penalties on student rewards cards are pretty steep. Make your minimum payment even one day late and a penalty interest rate of as much as 28.99 percent slams into place. You'll also be hit with a late fee of as much as $39. The penalties are just as severe if you should go over your card's credit line. So keep a close watch on your card spending, especially on all those big purchases at the beginning of the semester.

Does the card offer an online payment alert? A payment reminder gets sent to your email, reminding you that your credit card due date is approaching. Signing up for an online payment alert is a great way to guard against sky-high late fees. Another great strategy is to sign up for automatic payments. With many credit cards, you can choose to have the minimum payment amount automatically debited from your checking account. That way your credit card bill will be paid on-time every single month.

As great as it is to nab rewards with a credit card, the most valuable part of using a credit card in college is establishing a good credit history. Making card purchases and paying your card bill on time every single month is a great way to establish a solid payment history.

The better your credit when you graduate, the better your financial options when you make the leap to the real word. So handle that rewards card with care.