When it Comes to Credit Cards, be Careful and be Smart!

by Ashley Crawford, Assistant Editor

College applications have been sent. Acceptance letters are beginning to circulate. And before you know it, graduating seniors will be off to college, experiencing a new kind of independence. But with that newfound independence comes a load of new responsibilities; one very important responsibility is how to practice safe credit card use.

Millions of Americans struggle with credit card debt. As a new college student, it is important to be literate in the terminology and techniques for smart credit card use. Before committing to any credit card company, compare important features of each card. Be very careful what you apply for. Credit card features include the annual percentage rate (APR), credit limit, grace period, and the fees that may be associated with the card. 

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The APR is the interest rate that is charged on any balance carried over or not paid off each month. Low APRs are the way to go. Be sure to pay attention to whether or not a particular card comes with a teaser rate. Credit card companies will often try to lure you into dept using low or zero interest “teaser rates.” But these only last for a temporary period of time. Looks can be deceiving and you could wind up in the trap of having to pay high interest rates down the road.

Your credit limit is the maximum amount of money the credit card company will let you borrow at any one time. In other words it is the maximum balance you are allowed to carry. Having a high credit limit is good for your credit score, but be careful about not overspending. Remember, if you pay your entire balance on time, you don’t pay any interest. So it is best to think of your credit limit as what you will be able to pay when the bill comes—not what the company says you can spend.

A grace period is the time you are given to make your monthly payment you are not charged interest on new purchases. Grace periods last from the time you get your bill until the due date, which is usually only a few weeks. And again, if the previous month’s balance is paid off in full, you avoid interest. 

       Many credit card companies charge fees for making late payments or exceeding your limit. Some also charge an annual fee. Make sure to avoid cards with annual fees whenever possible. Be mindful of all fees before committing to any credit card.

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Since it is unrealistic to expect college students not to get credit cards, here are some tips to keep your credit score in good standing:

Tip 1: First and foremost, keep only one or two credit cards. Having too many credit cards increases the chance of you charging more than you can afford, which can lead to late payments and poor credit scores.

Tip 2: Sign up for Automatic Bill Pay. It is very important that you make your credit card payments on time.  This will boost your credit score. Late payments will decrease your credit score, which will have negative long-term effects.

Tip 3: Don’t exceed your credit limit. Keep track of what you are charging to help with this. Spending past your credit limit can increase interest rates, which can raise your payments.

Tip 4: Don’t take out cash advances. Many times this type of use comes with high finance charges, and interest begins to build right away.

Tip 5: Avoid paying only the minimum amount due. Charge only what you can afford to pay off in full each month. This is the only way to avoid finance charges.

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         College should be a time when you begin to build your credit. Proper use of credit is important for your future financial success. Credit can be the deciding factor in being able to purchase a home, a car, possibly getting a job after college. Take this responsibility serious and be smart. Take it from a former Simpson Street Free Press reporter who told us, “Getting a credit card was probably one of the worst decisions I ever made. If I had known then what I know now, I would have done so many things differently.” 

         Here is another important piece of advice: It’s best to develop good saving and spending habits while you’re still in high school, long before you ever apply for a credit card. Believe me, you will be very glad you did.

[Sources: www.texasattorneygeneral.gov; www.buffalostate.edu; www.balancepro.net]