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Need a Credit Card to Cover Expenses? What You Need to Know

Why a Credit Card?

According to the Nellie Mae Education Foundation, 81% of college freshman have at least one credit card. Credit cards facilitate purchases from textbooks to clothes to medical emergencies. Used responsibly, credit cards build financial management skills; however, used irresponsibly, they do more harm than good.

While the law stipulates that anyone under age 21 must have a co-signer on a credit card application, students and their parents need to be attentive when choosing a credit card. Students should set limits, understand good credit, and, most importantly, avoiding debt.

Understanding the Basics

The first thing to understand is that credit cards are not debit cards. When using a debit card, the money you are spending is pulled immediately from your checking account. However, with a credit card, the bank is lending you the money, which means you have an outstanding loan.

The amount of interest or the sum of money charged for using the loan varies among credit card companies. Federal law mandates that all credit card companies offer at least a 21-day interest-free grace period. Paying off your credit card statement within the grace period prevents you from incurring interest. If you only make a partial payment, interest will be added to the remaining balance, and you will pay more than the original price tag.

When selecting a card, you’ll see the card’s annual percent rate of interest (APR) that you will be charged on your credit card balance if the full amount isn’t paid by the due date. You want to find the lowest interest rate possible, just in case.

The average interest rate is just under 15%, but interest rates on student cards can vary widely. The Sovereign Bank Student MasterCard has a 10% interest rate, while the Chase Student Flexible Rewards Card has an 18% interest rate. If you use websites like, you’ll find that spending $1,000, and only making your minimum monthly payments (instead of paying your balance in full), you’ll pay an additional $87.92 or $91.68, respectively, each month.

Where to Get a Credit Card

Finding the right card for you, again, requires research. Websites such as,, and, compile reviews of cards posted from other student users who already have the card you may be considering.

Reward cards offering airline miles or cash back may be useful in making your money work for you; however, these cards usually come with expensive yearly fees and high interest rates.

Another option for students is joining a credit union. While credit unions have specific membership terms, the requirements have loosened significantly. Credit unions have low interest rates and are much easier to deal with if problems arise.

Credit Score

Credit scoring is a system that lenders use to determine your credit worthiness. Credit scores are based on your bill-paying history, the number of accounts you hold, late payments, outstanding debt, any actions taken to collect that debt, and the age of your accounts.

Your ability to get personal loans, home mortgages, or future employment can be directly affected by your credit score. Paying your bills in full and on time will help you establish a good credit score, while paying your bills late or not at all will result in a bad credit score.

The National Foundation for Credit Counseling reports that nearly one-half of college students saddle themselves with more than $3,000 of debt by the time they graduate. While the amount of debt may be insignificant, the damage done to your credit score may take years to fix.

Today’s guest article is provided by Rebecca Lindegren. Rebecca is the Community Relations Manager for American University’s international relations degree online, a full graduate program offered entirely on the web. She is also the Editor-in-Chief for the news category at The Word Is Bond. Outside work, Rebecca spends her time skiing, cycling and cooking. Follow her on twitter.

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