Information About Credit Cards

What Students Need to Know

What you need to know:

"I think that credit cards are great...tempting, but helpful."

The decisions you make now about credit cards can affect your life for many years to come. So, here’s what you should know before signing up for a credit card.

  • Some cards charge an annual fee- Some cards may charge you an annual fee (from about $50 to more than $100 per year) just to have the card in your wallet.
  • Good (or bad) credit counts- Having a credit card isn't a bad thing because it helps you build a credit history. Your credit history in college (or graduate school), it may impact your ability to get a private student loan to cover tuition, room and board costs. So be very careful and always keep an eye on that credit.
  • Don’t charge more than you can pay (or more than your limit)- Having a credit card doesn't give you “free” money. You have to pay your bill each month, and you can’t spend more than the card’s credit limit. If you don’t pay your bill, you’ll have to pay interest and possibly additional fees.
  • Look into various companies before making a final decision- When looking for a credit card, don't just choose the first one your eyes land on. Various companies offer different rewards and different fees. Be sure to look into this before making a decision.

What you should look for:

  1. If going to carry a balance, you want the lowest possible interest rate and a low introductory rate. If this is going to be your go-to-card for most of what you buy, look for a card with a generous credit limit and a solid rewards program.
  2. Look for credit card companies that don't charge many or pricey fees. Take a look at the annual fees(Annual fees make it harder to repay your balance. Some cards have no annual fees and others have annual fees that can run hundreds of dollars.)
  3. Watch the interest rates.

What you should be aware of:

  • Check and Compare Interest Rates: The interest rate, or APR as it is most commonly referred to, is the annual rate of interest one is charged if their balance is carried over from the previous month.
  • Beware of Hidden Fees: Some card companies trick people into thinking they do not have an annual fee, when in actuality, they really do, so make sure your alert and aware.

Important Credit Terms:

1. Annual fee -- A bank charge imposed each year for use of a credit card. It may also be called a membership or participation fee. It can range from $15 to $300, and usually gets billed directly to the customer's monthly statement. Many credit cards come without an annual fee.

2. Annual percentage rate (APR) -- A yearly interest rate that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. \

3. Average daily balance -- This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12.

4. Balance transfer -- The process of moving an unpaid credit card debt from one issuer to another. Card issuers sometimes offer teaser rates to encourage balance transfers coming in and balance-transfer fees to discourage them from going out. Make sure if you're making a balance transfer you know exactly when the introductory rate expires.