What will it cost you? | Building Good Credit | Student Credit Card Stats

Free sandwiches, pizzas and  t-shirts are not FREE!

Steer clear of lenders who offer free gifts to entice you to open credit card accounts which might over-extend your budget. These accounts typically have an annual fee, monthly fees and higher interest rates. Visit our Act Now page to join our campaign to ban these gifts and require responsible marketing to college students.

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Know What Your Credit Costs You

Make the credit card work for you by paying off the balance every month. Making a minimum payment every month extends the life of the debt and is very expensive.

For example, if you pay only the minimum payment due each month on a $1,000 balance with an 18 percent APR, by some estimates you’ll spend seven years and an additional $1,731 in interest to pay back what you owe. Others estimate it could take longer, nearly 13 years, plus over $1,000 in interest. Either way, by paying only the minimum amount due, you could spend almost twice as long, and perhaps three times as long, paying off a $1,000 balance as it takes to earn a four-year degree.

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Build Good Credit

• Determine what the card will be used for and how the monthly bills will be paid.

• Shop around for the best deal. Bankrate.com offers the most recent survey of student credit cards.

• Study your card agreement closely, and always read the fine print flyers enclosed with every bill. Credit card offers differ substantially, and the issuer usually has the right to change the terms of your credit card agreement at any time and for any reason. This means the card issuer can raise your interest rate even though you have paid as agreed, and can increase the fees you pay for exceeding your credit limit or for paying late, for example.

• Always pay off the balance monthly and on time to avoid an increase in the interest rate.

• Pay close attention to your balance and do not exceed your limit.

• Stay away from cash advances which carry a higher interest rate than the interest rate charged on purchases made with the card. The card issuer will apply credit card payments to the lowest interest rate items first, allowing the debt to mount on the higher interest rate items, such as cash advances, until the balance is paid off.

• Set a budget and try to keep your debt payments below 10 percent of your net income after taxes. Ex. If you take home $750 a month, spend no more than $75 a month on credit.

• If you manage your credit card online, be sure to set up email alerts that keep you informed when your payment is due and when you are close to or exceed your credit limit.

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Student Credit Card Statistics

• The number of undergraduate college students with credit cards: 83%

• The average credit card debt per student in 2001: $2,327

• Senior adults (81%) are more inclined to pay off credit card balances each month compared to Young Baby Boomers (42%) and Generation X and Y adults (39%).