Student Credit Card and Credit Education Blog

We all know that credit cards help you build your credit history. However, some people think that in order to build your credit score you have to carry a balance on your card at the end of the month. This is not true. You will build your credit history whether you pay your credit card off every month or carry a balance.  In fact, it is actually healthier to pay off the balance on time every month. When you carry a balance you have to pay interest. The more money you carry over, the more interest you end up paying in the long run.

If you do end up carrying a balance from month to month make sure it is a small one. It is also important to keep a low usage ratio.  If you credit limit is $5,000 and you carry a balance of $2,500 that is a 50% usage ratio which is not good. You should keep your credit card usage ratio as low as possible.

Credit card debt is at an all time high with millions of Americans drowning in that deep sea of plastic. Wouldn’t it be nice if you could just mold your credit cards into a frisbee and toss your troubles away?  That sounds like heaven to me.  Unfortunately, however,  life is not that easy.  Our actions hold consequences, but there are options for those out there who are struggling to stay above water with their credit card payments.  Let’s outline a game plan to help get you out of that plastic sea and back on shore.

For those with solid credit: If you have good credit but are burdened with huge monthly payments than you may want to apply for a Discover More Card.  You can transfer over your balance from cards with high interest rates. There is a 0% APR for up to 12 months on balance transfers, then a low 11% APR thereafter.

When getting a new credit card is not an option: If transferring the balance on some or all of your credit cards is not a possibility because of your credit, but you have a lot of credit card debt, you should apply for credit card consolidation.  In some cases you can stretch out your payments for 72 months making your monthly payment more manageable.

Consolidating more than just credit cards: If you have other unsecured debt besides credit cards, (car loans, home loan, etc), and want to consolidate all of it, you should use a debt consultation service. This is for individuals who have a minimum of $10,000 of debt.

ScholarshipPoints code: DSOLUTION

The fact you understand the value of owning and using a credit card responsibly puts you light years ahead of most students your age. You see the big picture at a time when most are just focused on the here and now. After all, knowledge as they say is power and knowing what it takes to build good credit, recognizing the difference between APR and APY, and being familiar with the term “two cycle average” puts you on a completely different stratosphere than most.

Still, it’s good to review these three important aspects of credit while educating those who are new to the world of personal finance. As you are aware the sooner you realize that you are the one who holds the key to that new car and big dream house the sooner you can get started building a credit foundation worthy of turning those dreams into reality.

1. How to build good credit

Knowing what makes up your credit rating is very important. There are five key markers that go into your FICO score calculation with a credit card serving as a key ingredient in four out of the five key categories.

• 35% Payment history
• 30% Outstanding debt
• 15% Length of your credit history
• 10% Recent inquires on your credit report
• 10% Types of credit in use

2. The difference between APR and APY

APR is your annual percentage rate while APY is your annual percentage yield. APR is the measure used to calculate how much interest will be accrued on your principle balance annually without taking compound interest into account. APY on the other hand is the same interest rate measure, however, it also accounts for the compound interest making it a better indicator of how much you will actually pay in interest.

3. Two-Cycle Average Daily Balance

This is the credit card industries dirty little secret. How the two-cycle daily balance works is simple: instead of computing your average daily balance for the current billing cycle, it computes the average daily balance for the current and previous billing cycle. You want to find a credit card company like Citi that does not take advantage of students by putting in place a two-cycle average daily balance billing cycle. What this two-cycle system means for you is that you pay more money in interest each month.

Let’s take an example. Say you have a starting balance of $1,000 on a credit card with a 15% APR. If you do nothing all month your finance charge will be computed as such:

(APR * days in billing cycle * ADB) / days in year = interest

(.15 * 30 * 1000) / 365 = $12.74 interest

So far, so good. But let’s say that you had a starting balance of $1,500 the previous month, and a starting balance of $1,000 this month. Your two-cycle average daily balance would be $1,250. If your credit card uses two cycle average daily balance, you will now pay:

(APR * days in billing cycle * TCADB) / days in year = interest

(.15 * 30 * 1250) / 365 = $15.41 interest

Establishing positive credit is obvioulsy important but getting the best card to use as your conduit is equally important. That’s why the Citi mtvU Platinum card and Citi Forward card continue to top our list of best cards for students. From rewarding students for having a good GPA to lowering your APR when you make a purchase, stay under your credit line and pay on time 3 billing periods in a row they are in a class of their own. It’s fun to dream big, but it’s even more fun to live that dream.

The best college cards for students: Citi mtvU & Citi Forward card

There are two things I want you to do next time you speak with your credit card company.

1) Ask them if they apply your payments to the lowest interest portion of your balance first, and

2) Ask them if they raise your interest rate on outstanding balances.

Under the Credit Card Accountability, Responsibility, and Disclosure Act passed in May banks are no longer able to get away with this.   The Act is supposed to be officially in place by February but consumer complaints may expedite the full enforcement of the Act by December 1.

Let me just start off by saying I was a few fries short of a happy meal back in my college days. I stayed up way too late and drank entirely too much. Needless to say clarity of thought was not my ally during those hazy days. That said, I’m sure you’re wondering how on earth someone could wind up paying more than a hundred bucks for a pack of gum. Well, lets follow the bouncing ball on its enchanted path to overdraft charges.

That particular Friday started off innocent enough as I recall. I woke up at noon, took a quick shower, grabbed a bite, and began my day. I then decided to skip my two o’clock Statistics class. I know I shouldn’t have skipped class but probability theory and standard deviations just weren’t doing it for me. In hind sight getting my butt to class would have saved me a lot of money. Anyway, after I made the executive decision to skip class I headed to the gas station. I realized on my way that I didn’t have any cash on me, but that wasn’t a big deal because I had my debit card. I knew my checking account balance was fairly low however. I was thinking my balance was around $20 bucks. This was my first mistake. All I had to do was call and confirm my actual balance, but I was too lazy.

I then proceeded to pumped $15 of gas, which was fine, but it was the next purchase that set in motion a rash of overdraft charges that had never before been seen. I strolled into the convenient store after pumping my gas and paid for a pack of gum. That $1.50 pack of gum, believe it or not, set me over the brink. I would later discover I was hit with a $39.00 overdraft fee, yikes! As it turns out I only had $16 bucks left in my account that day. The gas charge was fine but the gum purchase pushed me past my available balance threshold. Still, I was none-the-wiser at the time as I continued on my merry way.

After the gas station I swung into the liquor store and picked up some beer for the night. This was strike two. I already knew I was dangerously close to my remaining balance but made the purchase anyway figuring I could just transfer the funds over to my account when I got home that afternoon and avoid any fees.

Here is where a little bad luck and incompetence come into play. When I got home I did transferred the funds over just as I promised myself, but transferred them the WRONG way! I wanted to transfer money from my ING account to my Citi account, which was connected to my debit card, but instead accidentally clicked transfer funds from my Citi account to my ING. Strike three! That was $117 in overdraft charges ($39 x 3) that hit me within an hour!

What I should have done

• I should have called to get my balance
• I should have spoke to a customer service representative to at least dispute my accidental transfer request and get $39 waved
• I should have had an overdraft protection plan. Had I been using my ING debit card instead of my Citi I would have saved myself a lot of money. ING doesn’t charge you a flat overdraft fee, provided you fall within your qualified protection line. Here is how it works: If I was extended a $100 protection line, which I was, and made some purchases totaling $26, while only having $16 in my account the $10 bucks would be pulled from my protection line. Then I would have only paid interest (based on the ING Prime rate) on that $10 until my next deposit was made. Pretty sweet deal.

Open a FREE ING Checking Account Now!

To this day I haven’t bought another pack of Doublemint gum.  It hurts too much.

ScholarshipPoints Code: GUMYUMGUM

From Student Loan News, Updates and Blog Posts » Credit Cards:

Having a budget while you are in grad school will help you successfully pay for school without being strapped for cash.

Originally published by Student Loan News, Updates and Blog Posts » Credit Cards.

From Student Loan News, Updates and Blog Posts » Credit Cards:

Having a budget while you are in grad school will help you successfully pay for school without being strapped for cash.

Originally published by Student Loan News, Updates and Blog Posts » Credit Cards.

Sometime over the past 60 years the view on credit cards has moved from revolutionary novelty to overused crutch that millions of Americans blame for their financial woes. But credit cards, which have been around since 1950, are an important financial tool that everyone should have in their arsenal, especially college students as they are working toward building a solid credit foundation. If you act responsibility there is absolutely nothing to be scared of.

When credit cards were first introduced they were only valid at select restaurants in New York, but today they are a widely accepted form of payment almost everywhere you go. The advent of the Internet placed even more weight on this mode of payment over the past decade. In fact, nearly 60 percent of all online purchases are made with a credit card, opposed to debit cards or third party companies like Paypal. Simply stated, credit cards provide you with the means to make a purchase today with the promise that you’ll pay it back with interest tomorrow. So if that’s all a credit card is designed to do why all the fuss? Why are people scared to own one? The two reasons I hear most often from students are that they are uncertain about credit card fees and fluctuating APR’s. Oh ya, and that Mom and Dad are telling them they better not get a credit card or else.

It’s true that credit cards carry fees, and it’s also true that your APR can fluctuate, but once you understand how and why those fees and changes occur you’ll see there’s nothing to be scared of. Then, after you explain to your parents that you understand the pitfalls that accompany credit cards they will be more inclined to sign off on the idea that you are a responsible young adult ready to take the next important step.

Common Credit Card Fees

• Annual Fee: a yearly fee charged for the convenience of having a credit card
• Application Fee: a fee charged for completing an application
• Cash Advance Fee: usually a 1-3% fee per cash transaction
• Late Fee: a charge made for missing the due date on your monthly payment
• Over-the-limit Fee: a charge made for exceeding your credit limit
• Return Check Fee: a charge for having insufficient funds to pay your bill

The good news is that all the fees listed above are avoidable. The annual fee and application fee can be avoided if you find a company like Citibank that doesn’t charge them. Citibank has designed two cards, the Citi mtvU and Citi Forward card, exclusively for students with no annual or application fees and great reward benefits. The additional fees listed are avoidable if you simply act responsibly.

Knowing your APR

• APR Purchases: generally you will have one APR for purchases and one APR for cash advances and balance transfers
• Introductory APR: these are generally offered to entice you to sign up and then increase at the end of the introductory period
• Penalty APR: your rate will increase if you are late on a monthly payment (usually two or more times)
• Tiered APR: Pending how much you owe will reflect a different APR tier.

It’s important to note that you can call your credit card company at anytime to request a rate reduction as your credit score strengthens. In fact, with the Citi Forward card you can earn up to a 2% APR reduction when you make a purchase, stay under your credit line, and make on time payments 3 billing periods in a row. Again, acting responsibly benefits you.

So what is there to be scared of? Spend within your means, establish positive credit history, and earn points you can buy cool stuff with. If that’s scary than I hope to be frightened for the rest of my days.

The best college cards for students: Citi mtvU & Citi Forward card

ScholarshipPoints code: RESPONSIBLE

From Student Loan News, Updates and Blog Posts » Credit Cards:

I just have to laugh when I hear people say that credit cards put you in debt. I believe what they are really trying to say is, I’m irresponsible and can’t control my spending ways. That would at least makes sense to me.
The fact is credit cards serve a real purpose if used [...]

Originally published by Student Loan News, Updates and Blog Posts » Credit Cards.

Credit card theft is something we are all weary of, but do we do enough to protect ourselves? A former colleague of mine was a victim of credit card theft this past May. Fortunately for her she picked up on the fraudulent activity within days of the card being compromised after calling to get an account balance. It’s a scary thing when someone breaks into your safe haven.

Just last month the Department of Justice announced that more than 130 million credit and debit card numbers were allegedly stolen by a group of hackers. They designed a program that was able to find its way around a network’s firewall to steal credit and debit card information. This effected Hannaford’s, 7-Eleven, and Heartland Payment Services customers. Inevitably it will happen again, but there are some things you can do to protect yourself.

Protection Tips

• Call and request a new credit card number from your lending bank every two years. The reason it’s important to change your account number and not just cancel your card and apply for a new one is because the length of time you stay with a credit card company is counted positively toward your FICO score.
• Become more vigilant. Check out your account statement once a week online or make a quick call to ensure the balance is consistent to where you believe it should be.
• Don’t ever write your entire account number on a check if you are manually sending in a payment. The last four numbers are sufficient. The billing department will be able to match your name and cross reference the last four numbers to apply your payment.
• An alert service is great to have for several reasons. If you have a credit card that you seldom use you may not realize it has been compromised. If the perpetrator changed the billing address you’d never even receive a statement. That would in turn lead to missed payments and a poor FICO score. Nowadays you can sample a service for FREE and see what you think. It’s nice to have that insurance in your back pocket.

All it takes is a few simple steps to help keep you one step ahead of the hackers.

Scholarshippoints Code: THEFTOHNO