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Office of Financial Aid & Scholarships

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.

If used responsibly, credit cards can have many advantages for college students including:

  • Beginning to establish a good credit report.  Making small purchases and paying them off every month will be reflected on your credit report.  These positive records will be beneficial when you want to rent an apartment, buy a car, or apply for certain jobs after college.

  • Learning fiscal responsibility.  Living on a limited income is not easy but learning to control your spending is a habit that will carry for the remainder of your life.

  • A resource for emergencies.  An emergency is not a new pair of shoes, a $70 pair of jeans, or video games.  When emergencies such as car repairs or additional textbooks appear, a credit card can be an option for students.  When using a credit card for emergencies it is important to have a repayment plan and to stick to it!

If NOT used responsibly, credit cards can have many disadvantages for college students including:

  • Not learning fiscal responsibility.  Student who don’t have a solid understanding about credit cards often run up a large amount of debt that is difficult, if not impossible, for a college student to repay in a timely manner. (The average senior college student graduates with over $4000 in credit card debt.)

  • Building a credit history.  If a student does not use a credit card responsibly (paying the card on time, paying the at least the minimum payment, carrying a large balance), these negative marks will appear on a credit report.  Ruining your credit report while in college will make it difficult to be approved for a car loan, rent an apartment, and possibly obtain employment after college. If students do not feel they are ready for a credit card, it is much easier to establish credit after college than to fix it after mistakes have been made.

  • A resource for luxuries.  Students often mistake wants for needs, especially when a credit card is available to use.  Credit cards make it easy for students to live beyond their means.

If you are unsure if a credit card is a good option for you, talk to your parents or another adult who is financially responsible.  


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.bankrate.com/calculators/index-of-credit-card-calculators.aspx 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. 


LAWS THAT AFFECT YOU

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

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.