Credit Cards

Building credit during college is important, but there are potential pitfalls. Before applying for a credit card, it is important to assess your level of responsibility and financial means. The credit card decisions you make during college could affect your financial future. 

NEW LAWS OF 2009 THAT AFFECT YOU

  1. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card

  2. Credit card companies cannot have advertising events within 1,000 feet of a college or university campus or school related event.

    Click here for more detailed information about the changes.

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CREDIT CARD TERMS TO KNOW

When applying for a credit card, it is important to read the terms and conditions. Not all credit cards will be right for you and it is important to shop around for one that fits your needs.

Annual Fee: An annual (yearly) fee charged by a credit card company each year for use of a credit card. This is a separate fee from interest rate on purchases. While annual fees were once common, they largely disappeared in the '80s and '90s, remaining only on a few classes of cards, such as secured cards or those that offer airline frequent flier miles as a reward.

Annual Percentage Rate (APR): The annual percentage rate (APR) is the interest rate charged on credit card balances that is applied each month that an outstanding balance.

Available Credit: The credit limit is the amount of money the credit card company allows you to use. The difference between your credit limit and your current balance is the available balance.

Balance:The total amount owed from past and current charges on the account.

Cash Advance: A cash withdrawal from your credit line with finance charges accruing immediately.

Grace Period: The grace period is the time during which you are allowed to pay your credit card bill without having to pay interest. The Credit Card Act of 2009 requires that if issuers have grace periods, they must last at least 21 days.

Late Fee: A fee charged for payments received after the due date.

Minimum Monthly Payment: The minimum payment is the lowest amount of money that you are required to pay on your credit card statement each month. By paying only the minimum, the balance will take longer to pay off and more interest will accrue. Visit http://www.federalreserve.gov/creditcardcalculator/ to calculate how paying more than the minimum will have a positive impact on the amount of time and interest it takes to pay off your balance.

Over the Limit Fee: A fee charged for going over the credit limit of your account.

Secured Credit Card: Secured credit cards require collateral, usually a cash deposit with the issuing institution, for approval. They are designed for people with no credit or poor credit.
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WHAT TO KEEP IN MIND WHEN USING A CREDIT CARD

Out of all types of credit, credit cards have the highest interest rate.

Do not put more on your credit card than what you can pay off at the end of the month. Paying off the balance each month will help you avoid interest charges.

If you are unable to pay off the balance make sure to pay off more than the minimum payment. Pay as much as you possibly can to save on unnecessary interest charges.

Be aware of wants and needs. Credit cards should not be used to extend your spending limits on wants. 

Having a credit card for emergencies is a good idea, but make sure you define what an emergency is before getting a credit card.