Credit Cards for Students : Three Things to Know

While you are a student, the only way to make ends meet may be through the use of a credit card. However, before you indulge in the business or charging, there are three things that you should know about student credit cards.

• APRs Vary. APRs are the cost of borrowing money. Though many credit card companies are more than willing to give you credit, that credit comes with a price. To save yourself money, you will want to choose a card that has low rates. Many student credit cards have a zero percent APR. These are definitely the types of cards you want. If you already have a card and you are not sure what the APR is, check the bottom of your credit card statement. If the rate is high, try negotiating a lower rate with the credit card company. If the company is not willing to negotiate, try moving your debt to a credit card with lower rates (and no annual fees).

• Credit Cards Have Bonuses. Some student credit cards offer cash-back bonuses on purchases, such as gas and food. These are great credit cards for students, because you actually make money when you charge items, especially if you pay off the balance promptly. Other student credit cards offer air travel rewards based upon a point system. These type of rewards can come in very handy when you want to visit home, take a vacation, etc.
  
• Your Credit Score is Important. Your credit score is a three-digit number that appears on your credit report. The higher your credit score is, the better your chance will be of getting student credit cards with low interest rates. If you need to find out what your credit score is, you can get a free credit report online.

How To Use Your Credit Cards Wisely

Are you one of the thousands pulling your hair out trying to figure out how you're going to pay your credit card bills? Using your credit cards wisely and sensibly will help you avoid financial problems and establish a strong credit rating, so here's some information to help you get your credit card problems under control.
Credit cards are convenient for buying things now and paying later. Credit card companies are in business to make money. Don't forget that every time you use your credit card you are borrowing money. You will pay a finance charge if you don't pay off your balance each month.
Millions of people use credit cards to avoid carrying large amounts of cash, for emergencies, to track spending, etc. However, charging more than your income allows can be worrisome and potentially devastating to your finances and your credit rating. The pitfalls of credit card use are the accumulation of large amounts of debt and the inability to make more than the minimum monthly payment.
It's important to look out for your own interests. Some credit card companies have lowered minimum monthly payments to less than two percent of the balance. It could take 30 years or more to pay off your credit cards if you pay only the minimum payment. Debit cards should not be confused with credit cards. There is no credit extended with a debit card. The money is deducted directly from your savings or checking account. The bottom line is don't spend more than you can afford to pay on a monthly basis.
Limit the number of credit card applications you fill out. There will be an inquiry into your credit report for each application you submit. Your credit report contains a record of every company or institution that has evaluated your credit. It reflects negatively on your credit score if you have an inquiry that does not lead to the issuance of a credit card. Obtaining too many credit cards can affect your ability to finance other purchases as well, such as homes or automobiles. Too much available credit can cause suspicion in the eyes of a lender as to your ability to repay your potential debt.
Consider what you are looking for in a credit card such as the interest rate, annual fee, grace period, and credit line. Be wary of companies offering cards with a low introductory interest rate that often lasts for only a brief period of time, after which they become considerably higher. The average interest rate for credit cards is over fifteen percent. Choose a credit card with no annual fee. Credit card issuers are paid a percentage from the vendor each time you make a purchase. Many companies have waived the annual fee to attract customers. Avoid cards offering a high credit limit. There is great potential to overspend. Instead, pay down your balance before using your card to make additional purchases. Send in your payment well ahead of the due date. Issuers may charge late fees, and late payments could result in a considerably higher interest rate than the advertised rate.
So the bottom line is by using your credit cards wisely you can reduce adverse effects of credit cards and maximize the benefits by spending wisely, using self-discipline, and paying off your balance as quickly as possible to avoid unnecessary fees.
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Useful Tips When Choosing Credit Cards

Chances are you have received your share of 'pre-approved' credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept 'before the offer expires.' Before you accept, shop around to get the best deal.

Credit Card Terms:
A credit card is a form of borrowing that often involves charges. Credit terms and conditions affect your overall cost. So it's wise to compare terms and fees before you agree to open a credit or charge card account. The following are some important terms to consider that generally must be disclosed in credit card applications or in solicitations that require no application.

Annual Percentage Rate:
The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements. Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators - called indexes - change. Because the rate change is linked to the index's performance, these plans are called 'variable rate' programs.

Free Period:
Also called a 'grace period,' a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you'll have enough time to pay.

Annual Fees:
Most issuers charge annual membership or participation fees.
Transaction Fees and Other Charges:
A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit limit. Some charge a monthly fee whether or not you use the card.

Other Costs and Features:
Credit terms vary among issuers. When shopping for a card, think about how you plan to use it. If you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR, if there is a grace period for purchases. However, if you use the cash advance feature, many cards do not permit a grace period for the amounts due - even if they have a grace period for purchases. So, it may still be wise to consider the APR and balance computation method. Also, if you plan to pay for purchases over time, the APR and the balance computation method are definitely major considerations.
You'll probably also want to consider if the credit limit is high enough, how widely the card is accepted, and the plan's services and features.

Useful Tips: Keep these tips in mind when looking for or using a credit or charge card.

• Shop around for the plan that best fits your needs.
• Make sure you understand a plan's terms before you accept the card.
• Old on to receipts to reconcile charges when your bill arrives.
• Protect your cards and account numbers to prevent unauthorized use.
• Draw a line through blank spaces on charge slips so the amount can't be changed.
  

Finally, keep a record - in a safe place separate from your cards - of your account numbers, expiration dates and the phone numbers of each issuer to report a loss quickly and carry only the credit cards you think you'll use.

Student Credit Cards

More than 50 percent of Maryland college students and families with "unmet financial need" use credit cards to cover education costs, according to a recent survey by the Maryland Higher Education Commission.
State officials and experts called the findings a troubling echo of a national trend, though some financial aid authorities said that when used responsibly credit cards do not necessarily lead to unmanageable debt.
"This is a very dangerous way of paying for higher-education costs," James E. Lyons Sr., state secretary of higher education, said in a statement yesterday.
Unmet need is the gap between college costs and a student's ability to pay them after factoring in financial aid packages. In 2004, there was $32 billion in unmet need nationally. The average unmet need for Maryland public college students is $7,415, according to a state study in 2006.
College "costs," as defined in the survey, include tuition and books, but also living expenses, such as food and rent.
Though the recent survey of about 4,800 students did not ask respondents how they used their credit cards -- whether as a convenient way to make online book purchases or as a long-term loan to cover large tuition bills -- one expert said the results point to a need of warning students about the danger of relying on variable-interest charge cards.
"Using a credit card is basically taking out a high-risk loan," said Lauren Asher, associate director of the Project on Student Debt, "They may have other safer options, such as federal student loans."
Kalman Chany, author of Paying for College Without Going Broke, said general surveys of credit-card use can lead to overly alarmist conclusions.
"Most kids have credit cards now when they go to college, and surveys find that most tend to use them responsibly," Chany said. "The question is what are they using them for? What balances are they carrying?"
A study last year by the American Council on Education found that the majority of student cardholders paid off their balances each month, but that about 1 in 4 had used a credit card to pay some tuition. Of the roughly 40 percent of cardholders who did not pay off their debt each month, the median balance was $1,000.
Asher said more data were needed about precisely how students are using credit cards.
"The issue is to what degree are students using credit cards to meet educational costs that could be covered more safely from other sources," she said. "We don't really know the answer."