Student Credit Cards - Card Section

Student Credit Cards

Borrowing Level

In essence, when you charge something to your credit card, you are borrowing money. Many experts recommend that no more than 15-20% of your monthly household take-home pay be committed to credit card minimum payments and other loan payments, excluding rent or mortgage. Moreover, no more than 40% of your monthly take-home pay should go to paying all debts, including rent or mortgage. This percentage is known as your credit analysis ratio, a figure that represents what you owe compared to what you earn. It's a clear indicator of your financial well-being and is often used by lenders to evaluate your credit-worthiness.

Credit Card Basics

No, credit cards don't give you more moneyand the purchasing power they give you is not free either. They should be viewed as a method of payment. Credit card terms include certain fees and expenses, and require responsible payment practices. You can borrow money using a credit card, but you will ususally be charged a high interest rate. It is usually best to pay off the balance quickly.
Individual vs Joint Accounts

When you apply for a credit card, you choose the kind of credit you want. The type of credit you want should depend on an individual's circumstances. There are two main types of credit available for couples: individual and joint.

Individual credit is based on your assets, income and credit history only. You alone are responsible for paying the bills, not a spouse or companion.
Joint credit is based on the assets, income and credit history of both people who apply. Married couples often apply for joint credit. You may obtain more credit this way, but you'll both be responsible for the debt - even if you get divorced.

An additional person may be authorized to use your account. However, you (and your joint account holder, if any) remain responsible. Be careful who you authorize to use your account. You may also want to implement controls on an authorized user.

Credit Lines

When you are approved for credit, the Card Company or issuer puts a credit limit on your account. This is the maximum balance you can carry on your card. Your credit limit serves as a check to make sure that you are not borrowing more than you can pay back. Each card issuer has its own standards for setting credit limits. Some factors that may affect their decision are:

applicant's monthly income
Current debt (other credit card lines, car loans, student loans, etc.)
Length of residence at your current address
Home ownership
Number of times you've applied for credit

If you have established good credit, you may ask your card company to increase your credit limit. The answer will depend on your total financial picture. You may qualify for a higher credit limit if certain things are taking place that earn you good credit. the set of behaviours that earn you good credit are: 1) you always pay on time 2) your income has increased or your debts have decreased 3) you always pay more than the minimum due, or pay your balance in full.

Annual Fee

Some credit cards require an annual fee. This is the yearly cost for owning the card. The annual fee will be posted to your balance when you open the account and added each year on the anniversary of your account opening. Many annual fees can be waived later for good credit management practices or by simply asking the credit companies.

Late Fees

You can avoid late fees by being diligent and paying your bills on time. Late payments harm your credit history and could make it harder for you to get credit in the future. Late fees are charged if your payment doesn't reach the card company by the due date. To be sure your payment arrives on time, mail it at least five days before it's due.

Other Fees

Card companies may charge a fee if your balance exceeds your credit limit. You may also be charged fees for returned checks, returned cash advance checks, or stop-payment requests. Most of these fees are avoidable. Your card issuer will be able to explain all of these fees.

Account Balance and Minimum Payment

Your minimum payment is not the same as your account balance. You account alance is the total account debt as of the statement date. It includes any unpaid balance from last month along with new purchases since the closing date of your last statement, and any cash advances you may have taken. The Card Company will also add in any other charges such as an annual fee, finance charges, and other fees.

The minimum payment is the smallest amount of your balance you can pay by the due date and still meet the terms of your card agreement. Some people think that the minimum payment is the only amount you owe. This is not the case. You are responsible for the full balance and you'll owe interest on the portion of the balance that you don't pay.

Annual Percentage Rate (APR)

The Annual Percentage Rate (APR) is a good measure of the actual cost of credit. If you carry an unpaid balance, the APR is your best indicator of account costs and can help you determine how much it is costing you to borrow that money. The higher your APR, the more you will pay in finance charges. (Finance charges are the fees you pay your credit card company for using its money before paying it back). You can avoid finance charges by paying your balance in full every month. Your APR may be tied to a specific rate of interest such as the prime rate. This means your rate is variable and moves with the market. It could move up or down over time. A fixed APR, on the other hand, doesn't change in the way that a variable rate does. However, the card company can change the rates at any time.

Finance charges can be calculated in different ways. Your account statement describes the method that applies to you. In general, the calculation of finance charges are usually based on one of these methods:

Average daily balance – This is the method used by most credit card companies. The card company totals your balance each day during the billing period, adds these daily balances together and divides by the number of days in the billing period.
Adjusted balance – The card company subtracts payments you make during the billing period from your balance at the beginning of that period. This method is more favorable to you since your balance is kept lower and you pay less in finance charges.
Previous balance – This method applies the monthly finance charge to your beginning balance for the billing period. Purchases and payments during the month aren't included.
Ending balance – The card company may use your ending balance for the billing period. If so, any purchases and payments during the billing period are included.