Avoid the Pitfalls of Student Credit Cards
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by: barrywaters
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Word Count: 495
Now that you are a college student, credit card companies are going to court you with a passion you only wish you could see from prospective boyfriends or girlfriends. To a credit card company, you are their dream date: young, with a clean credit report and (they hope) no understanding at all of how credit cards work. They expect you to accept a credit card with an attractively low introductory rate, run up huge bills, then owe them tons of cash when the introductory period ends and your interest rate skyrockets. Lets disappoint them.
The first tip is to ignore the huge, sparkly "0 percent interest" printed in bright red and gold letters on the front of the brochure. That is the introductory rate. After a set period, probably six months, it vanishes, and suddenly you owe the real interest rate. The interest rate on credit cards pitched to students are generally higher than standard cards, and currently are about 13 to 21 percent. Student credit cards also come with high default rates that rocket up to 25 to 31 percent if you break any of the terms of your credit card, including something as slight as paying your bill a day late. The higher rate is retroactive, so regardless of what the rate was when you bought something, you will be billed at the higher interest rate until you pay your entire balance off. Once the interest starts compounding, you could pay two or three times as much as the item is worth.
The key to using a credit card well is to pick the card with the lowest regular interest rate you can find, then charge as though the zero percent introductory rate didnt exist and you were paying the regular interest rate. The fine print or the chart on the back of the form will tell you a credit cards real interest rate. The standard purchase annual percentage rate (APR) and the standard cash advance APR are what you are looking for. These are the real rates, which will kick in after the introductory period. Compare all of your student credit card offers, ignoring the introductory rates and all the frills and cash back offers; the only important considerations are the standard purchase APR and the standard cash advance APR.
Once you have found the credit cards with the lowest regular interest rates, read the rest of the fine print for catches like annual fees and high default interest rates, and use it to narrow your selection. Now that you have a few likely offers with low interest rates and no nasty surprises, you are free to consider rewards packages and pick the student credit card you like best. Have fun with your new credit card and start laying the groundwork for your future credit... on your terms. References Credit card applications . Credit cards for bad credit .
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