Student Debt and Credit Education Blog

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

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• Sorting Through Student Credit Card Offers