Credit 101: Shopping for a Student Credit Card

Not all credit cards are the same. Be sure to read the fine print and shop around for the best deal. Credit card offers contain a “Schumer Box” or disclosure table that reveals the most important terms of the contract. Here is an example:

Annual Percentage Rate for purchases and balance transfers* Grace period for repayment of the balance for purchases Method of computing the balance used in calculating finance charges for purchases Annual membership fee Minimum finance charge Miscellaneous fees
A fixed rate of 9.9% for six months. Thereafter, a variable rate of 10.8% + prime (currently 19.8%).* You will have a minimum of 25 days without a finance charge on new purchases if the total New Balance is paid in full each month by the statement closing date. Average daily balance (including new purchases) $25 For each Billing Period that your Account is subject to a finance charge, a minimum total Finance Charge of $0.50 will be imposed. Cash advance fee: 2.5% of amount of the cash advance, but not less than $2.50.
Late payment fee: $25
Over-the-credit-limit fee: $25
Returned check fee: $25

* Annual percentrage rate for cash advances: a fixed rate of 20.9%
Rates are subject to change if (a) you do not keep your account in good standing or (b) you do not maintain a good standing on your other credit acounts and excellent performance with the credit bureaus.

How you shop for credit depends on how you intend to use the credit
Here are some tips to help you:

  • A low interest rate is one of the most important factors for a credit card if you are likely to carry a balance from month to month. Beware of low “teaser” rates that will increase after an introductory period. Always know when your rate will increase and what it will increase to. Also, be aware that the rate for cash advances is usually higher than the rate for purchases.
  • A grace period is especially important to have if you plan to pay the balance in full each month. It will prevent you from being charged interest if you pay in full and on time.
  • Look for an average daily balance (excluding new purchases) method of computing the balance. This will save you money if you carry a balance, but it is hard to find. The average daily balance (including new purchases) is more typical. Be aware that the two-cycle billing method uses the past two months to compute the average balance when you switch from paying in full to carrying a balance.
  • There are many credit cards available today that do not charge an annual fee. Sometimes an annual fee is worth paying if you are going to take advantage of special incentives that a card offers (like frequent flier miles or cash back), and you plan to avoid finance charges and fees. However, many consumers end up paying more in annual fees and other charges than the incentive is worth.

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