Credit Card Applications — Not Applications For Free Money

College students usually wind up with two things after they graduate - a diploma and debt. The average debt that a typical student graduates with is almost $19,000, which is almost 66% higher than five years ago. A big portion of this is student loans, but a lot of it is just from unrestrained credit card use.

Credit card companies target college students. Campuses are flooded with applications by the thousands each day with offers enticing students to fill out a credit card application. Free stuff, perhaps the college student’s biggest weakness has lead many over the edge financially. They are offered t-shirt, mugs, and other incentives for just turning in an application. Many students apply and then use the credit they receive unwisely.

Credit cards for students quickly lead to their debt being doubled from the time they start college to the time they graduate. And their number of credit cards actually triples. By the time they are a senior in college, one-third of all college students will carry a balance between $3,000 and $7,000 of debt.

Credit Card Deals: Know the Difference

Credit cards do not give ‘free’ money-they simply change the way that you pay. Think of a credit card as a flexible, short-term loan. When you make a purchase, you are basically borrowing money from a credit card company and are expected to repay it when you get the bill.

Credit cards and debit cards should not be confused. They may look and feel exactly the same but they are completely different. When you use a debit card to buy things, the money is transferred immediately from your bank account to the store’s account. You can also use your debit card to get cash, make a deposit or transfer money between accounts. Some debit cards even offer point rewards and bonus points, with the added benefit of being secured by the money in a bank account.

Credit Card Pros and Cons

Let’s start with the pros - credit cards are convenient. And they can be useful financial tools as long as they are used in the right way. They allow you to purchase things worldwide. They are quick and easy to use. You can use them in person, over the phone, or online.

You don’t have to carry cash if you have a credit card, which adds to your personal safety. They can also protect your assets. If your card is lost or stolen, all you have to do is report it to the company and then your card will be deactivated - no one else can use it. But if you lose cash - it’s gone. The best credit cards even offer rewards for use that can add up to big savings on travel.

 So what are the cons? Credit cards can be expensive and very hard to control - especially for a younger student who may not realize how important it is to pay your monthly bill. If they are late with their payments, there are late fees that range from $15 to $35, not to mention the interest charges. It is important that students understand that using a credit card to pay for things you can’t afford will only increase your debt and make it unmanageable.

Establishing A Solid Credit History

Your credit history can be established by using credit cards - you can get either a good credit history, or a bad credit history. This is important because lenders consider it when approving you for a loan. They immediately look at your credit history to decide if you are a good investment. If you have bad credit history or no credit history, you will have a hard time qualifying for loans.

There are different factors in your credit report that can impact your credit scores. These include your payment history, your amount of credit, the highest balance and your borrowing patterns. To build a good credit history, you must be responsible with your credit and pay your bills on time.

Credit Card Fees

There are many costs associated with using credit cards. The APR (Annual Percentage Rate) is the cost of credit for not paying your payment in full on time. As an example, an APR of 17% does not mean that you pay 17% each month. That percent is what you would pay over the course of a year.

It can either be ‘fixed’ or ‘variable’. Fixed rates are usually higher, but you also know the amount you will be charged each month. A variable rate (also called a floating rate) will go up and down based on a published index. Also check your card member agreement or a written notice from the credit card company to see if rate changes are discussed.

Most likely, student cards will have no annual fee. Those that have good history may qualify for no annual fee offers, but some of the points reward cards and frequent flyer cards will generally have an annual fee of $30 to $100. There also may be transaction and other fees. Most cards charge a fee when you want a cash advance, make a late payment, or go over your allowed credit limit.

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