Student Debt and Credit Education Blog

If you’re 18 or older, odds are you’ve received at least one student credit card offer in the mail. Often times, the bright colors on the packaging and awesome-sounding introductory APR can blind us to the fact that maybe it isn’t exactly what we’re looking for in a credit card or that we don’t need credit at this very moment. (more…)

Hey there summer boys and girls! The heat is in full swing up here in Boston so if you are looking for something to do inside, consider checking your credit for free.

Did you know that every private student loan requires a good credit score and stable history? Even things like renting an apartment, buying a car or getting a cellphone can require credit to be approved. Therefore, it’s really important to keep on top of your score and make sure you are free of fraud and delinquency on your accounts.

So pull up a chair, bask in that amazing air conditioning (you know it feels good!) and head over to FreeCreditScore.com. Make sure that all your cards are listed properly and nothing appears that you don’t own. If you have any questions about credit once you get there, head over to Student Platinum’s Credit Education Center to learn more!

Check your credit for free! »

After you’ve checked your credit, head over to ScholarshipPoints and redeem this code for 25 scholarship points: FREECREDITYAY

It’s not exactly a secret that trying to build credit as a student is like power washing a house with toothbrush. There are a lot of hurdles, but having an established credit history is absolutely crucial for pretty much every big life event in the book.

For instance, did you know that in many cases you need to pass a credit check to rent an apartment? Or that for pricier cell phone carriers like Verizon, you need credit just to start a contract? (more…)

Hey everyone! Are you looking for ways to improve your credit score? StudentPlatinum has just added a page with four simple steps you can take to Improve Your Credit Score for Free.

The first of your options is to talk with a credit expert from a debt counseling company to develop a personal credit management plan.  The people at Credit.com can help you make sure you don’t go into debt by maintaining an adequate credit score.
If you’ve had a few glitches with your credit, you can review it and fix it at no charge. Freecreditreport.com can provide you with your credit report and credit score. If you have a high credit score, keep up the good work. You may be eligible for appealing rewards. If your credit score is on the lower side, a Credit.com expert can provide suggestions on how to improve this.

Since building a high credit score has become so important these days, why not start as soon as possible by opening up a credit account in college? You can use your card to make regular payments on things like food, books, and gas while at school by applying for a student credit card like the one offered by Discover. If you already have money for these items in your bank account, and were planning on paying for them with cash, think about using a card and paying the company directly instead so you can reap any rewards they throw your way for regular and on-time payments.

If for some reason you find yourself in multiple debts, one final step that this article mentions is to consolidate these debts into one payment, and reduce your debts significantly. This will make it much easier for you to keep track of your debt and eliminate it altogether in no time at all.

Make sure you check out the article. I hope you will find it helpful!

If you are a delinquent cardholder, meaning you have a slew of added fees and charges for payments made past the due date, you might consider re-aging your credit card to get you back on track.

It’s an increasingly common tactic employed by cardholders and their credit card companies. Here’s how it works. If you were behind in your payments by a few months, you could request that you card company erase those late payments and fees.

So why would a card company do that? Credit card companies want you to use your card. It is worthless for them to have an unpaid balance left alone month after month. In most cases, you will be required to make an immediate payment (typically one larger than your standard monthly payment). You may need to agree to a new plan that will likely require higher monthly payments.

Late payments can be a stain on your credit report and keep you from being approved for future credit cards, auto loans and mortgages. Re-aging is a savvy way to get back on track to being a responsible cardholder.

If you’re like the average American, you have somewhere around four credit cards (based on 2006 data.) With many cards comes more payments, increased complexity, and more variables that go into managing multiple credit accounts. I know first hand what an annoying and nerve-wracking experience it can be to plot out payment plans for multiple cards, so I’d like to give you some helpful guidelines. (more…)

Missing a card payment can be a nerve-wracking event if your credit is less than stellar and you are trying to build up a positive history. In recent times, a missed payment can result in a bank drastically reducing your credit limit, jacking up your annual percentage rate (APR) and worst of all, put you into default status.

Default is something that you should be trying to avoid with all your power. It immediately signals to existing and future lenders/creditors that you don’t know how to handle your finances and makes them extremely hesitant to do business with you. Although resuming your payments will bring you out of this status, it still is a red flag on your credit history, and can haunt you for up to four years.

If you missed a payment, the first thing I recommend is contacting your bank’s card services department. Explain your situation. Be nice and polite. In many cases, the bank will give you a one-time fee waiver and restore your account to its previous status. I accidentally missed a payment on my Bank of America AMEX card a few months ago and a friendly account manager was more than happy to clear my record when I asked nicely. As long as you don’t have a record of delinquency, bankers are usually more willing to help you out in the case of a mishap.

If you missed a payment because you couldn’t afford to make one, that gets a little more tricky. My recommendation in this case is to be honest about your situation with your bank. Although this reflects worse on your account than an accidental miss, nine times out of ten, the bank will at least respect the fact that you are informing them of your change in financial status and find a solution. In most cases, this involves freezing your credit card and structuring a repayment plan so that you don’t go any further into debt than you already are.

Bottom line: Be safe with your cards and don’t spend outside what you can afford to pay back within a month or two. If you need help, ask for it. Many banks are much more willing to negotiate and work with you on recovering their money before it goes into a collections status and your credit gets ruined any worse than it has to be.

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

We are often asked: What loans are available for students with bad credit?”.  In short, your options are limited.
We would always recommend you work on building your credit.  Visit www.studentplatinum.com to learn more about credit, how to build good credit and how to repair your credit if it goes south.
For some detailed information on Bad [...]

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

A new study to be released Monday by Sallie Mae, finds that the average undergraduate carried $3,173 in credit card debt last year, the highest recorded to date.

According to the USA Today article, the higher the grade level, the higher the debt.  College seniors who carry a credit card had an average of $4,138 in credit card debt in 2008! With the recent increases in interest rates due to the bad economy, this debt is likely to be far worse in 2009.

What does this mean?

Students are using their credit cards for more then just emergency purchases.  With the increase of tuition, gas prices, groceries, etc, students are using their cards for everyday expenses as well as school expenses.  This is very, very dangerous.  Student cards have very high rates to begin with, and it will take you years to pay off your debt once you graduate.  As we stress over and over again, only use your credit card for small purchases and pay it off in full each month.  This will not only keep you out of debt but will also help build your credit score.

What can you do?

If you are one of the unfortunate students mentioned above that have found themselves swimming in debt at an early age, don’t worry – there are many things you can do to manage your debt.  For starters, read our article “Three ways to get out of debt.”

If you are an underclassmen, apply for scholarships!  You never know when you will need the money, and this is money that you do not have to pay back!  We have two great scholarship options for you that do not cost you a thing:

Student Scholarship Search – An online directory of scholarships updated on a daily basis.

ScholarshipPoints – A free scholarship community where members earn points towards monthly scholarships up to $10,000

Take action early!  You will be thanking yourselves for years to come.

A recent student credit card survey our friends at www.ScholarshipPoints.com conducted showed that 85% of the students surveyed ranked APR as the most important factor when evaluating a credit card offer. Ask most people that same question and we bet you’d get the same answer. We think that people pay too much attention to APR without really understanding what it is.

APR or Annual Percentage Rate (the amount of interest charged per year on a loan or credit card balance) is a number that is legally required to be stated but that is not really indicative of what you actually pay.

The first reason students pay too much attention to APR is that APR only comes into play when you carry a balance from month to month in your credit cards. This means if you pay off your credit card charges within one billing period you don’t have to pay interest at all. Students worry excessively about a card’s APR and fail to understand the benefits.

We always recommend paying off your balance monthly and charging only what you can pay back. If you do this the most important factor for you is not APR but rather what are the card benefits. Here’s what I mean; I spend $300 on grocery items per month. I pay cash for them every month because I have that number budgeted. If I have a credit card that pays me back 5% cash on groceries with a 20% APR I know I can use that to buy my $300 worth of groceries and that paying it off without incurring interest is no problem. However, I also get $15 cash back which buys me a free pizza or two on the weekends. It goes the same with gas or any other reward.

Now if you do carry a balance its important to know what APR really is. APR is your interest rate but there is a difference between your interest rate and your interest charge. In simple terms, the rate is the percentage of your balance that your interest charge will be based on. The interest charge is the actual number of dollars that you pay for interest, based on your interest rate.

To make this easier to understand let’s look at the math. Strictly based upon APR if you owed $1,000 for one year at a 19% APR you would pay $190 in total divided over 12 months. Since your balance will fluctuate every month however this perfect scenario doesn’t exist. So the real question becomes, how does the credit card company calculate what balance to charge you interest on each month?

The method of interest calculation is where you can get socked if you don’t pay attention and so this is an equally if not more significant question to ask when evaluating a credit card if you plan on carrying a balance.

Credit card interest is calculated on one of three basic ways:

• Average Daily Balance. This is the most common calculation method. To figure the balance due, the credit card company totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day. The resulting daily balances are added for the billing cycle. Then, the total is divided by the number of days in the billing period to get the”average daily balance.” (Tip: making frequent payments whenever you can during the month will decrease the daily balances calculated at the end of the month and save you interest charges!)
• Adjusted Balance. This usually is the most advantageous method for you. The credit card company determines your balance by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period. Purchases made during the billing period aren’t included. This method gives you until the end of the billing period to pay a portion of your balance to avoid the interest charges on that amount.
• Previous Balance. This is the amount you owed at the end of the previous billing period. Payments, credits, and purchases made during the current billing period are not included.
  
• Two-cycle or Double-cycle Balances. Issuers sometimes calculate your balance using your last two month’s account activity. This approach eliminates the interest-free period if you go from paying your balance in full each month to paying only a portion each month of what you owe. We really don’t like this method and you should try to avoid it if possible.

From answering your questions via email and in the forums it’s clear that many students do not understand much about APR except big is bad but they are missing the point for sure. Credit card companies rely on all the people who don’t pay off their charges. Responsible credit card use entails charging only what you can pay back in a month or two. If you do that APR is far less important than what your credit card can do for you!

ScholarshipPoints members looking for their blog candy will find APRISDUMB quite a tasty snack. Go to www.ScholarshipPoints.com and enter that code for 20 points!