In college, it can be difficult to maintain a good, or even average credit score. Student loans accumulate every semester and if they are the only things going towards your credit score, it can be impossible to boost that number. While making payments towards rent, cars, loans, and/or any other type of bill will improve your number, in college a lot of students receive aid along the way with some of these costs. To graduate with a pile of loans coupled with a less than impressive credit score can be disheartening when trying to transition from college to “real world” life. If you are a student considering a credit card to boost the number but do not know a lot about them, these are some of the key things to consider and research before signing off on one.
- Credit Limit
- Based on your credit, any debt you have, and your history of handling payments, credit card companies will set a limit on how much you can charge to a credit card. The better your record, the more money you can charge. As a college student, the credit limit is $1,000 or less.
- Minimum Monthly Payments
- This is the lowest amount of money that the credit card company requires you to put towards your credit card balance without being hit with late fees and/or a rise in your interest rate. This minimum payment is a variable balance, meaning it varies from month to month. It can be calculated with the percent of the balance you as a cardholder, or the percent of the balance plus the finance charge.
- Late Fees
- These are the penalty for paying a balance or minimum payment after the due date. Depending on the company the first late fee can be waived, but these fees can range as high as $27-$38 on top of the balances you already owe on your statement.
- Interest Rates
- If you pay your credit card balances on time, in full, credit card interest rates will not apply to you. However, there are several types of rates that come with cards. They are:
- Credit Card Purchase APR: Interest on purchases that are not paid on your statement in full every billing period
- Credit Card Balance Transfer APR: the Interest rate you own when you move balances from other credit cards and loans. These can be as low as 0%.
- Credit Card Intro APR: A temporary rate for a limited period after opening an account.
- Cash Advance APR: This happens when you withdraw money from an ATM or bank branch with your credit card. The rates on this APR are extremely high, the average is 21.2%, and it is taxed on at the end of your credit card. That means, it is the last thing you can pay off on your card.
- Penalty APR: This the rate you will get hit with if you miss a due date. The average APR on a card is 26.1%.
- If you pay your credit card balances on time, in full, credit card interest rates will not apply to you. However, there are several types of rates that come with cards. They are:
If you are looking into getting a credit card, remember to keep these key factors in mind in order to build your credit score. It is essential to build up your credit score in order to have success within your future whether it be through job searching, house hunting, or even looking into more credit cards to build your score.