Page 330 - Keys to College Success

KEY 11.6 Learn to use credit carefully.

WHAT TO KNOW ABOUT . . . AND HOW TO USE WHAT YOU KNOW

Account balance. A dollar amount that includes any unpaid Charge only what you can afford to pay at the end of the month. Keep track
balance, new purchases and cash advances, finance charges, of your balance. Hold on to receipts and call customer service if you have
and fees. Updated monthly. questions.

Annual fee. The yearly cost that some companies charge for Look for cards without an annual fee or, if you’ve paid your bills on time, ask your
owning a card. current company to waive the fee.

Annual percentage rate (APR). The amount of interest Shop around (check www.studentcredit.com). Also, watch out for low, but
charged yearly on your unpaid balance. This is the cost of credit temporary, introductory rates that skyrocket to over 20% after a few months.
if you carry a balance in any given month. The higher the APR, Always ask what the long-term interest rate is and look for fixed rates (guar-
the more you pay in finance charges. anteed not to change).

Available credit. The unused portion of your credit line, It is important to have credit available for emergencies, so avoid charging
updated monthly on your bill. to the limit.
Cash advance. An immediate loan, in the form of cash, from Use a cash advance only in extreme emergencies because the finance charges
the credit card company. You are charged interest immediately start as soon as you complete the transaction and interest rates are greater than
and may also pay a separate transaction fee. the regular APR. It is a very expensive way to borrow money.

Credit limit. The debt ceiling the card company places on your Credit card companies generally set low credit limits for college students. Owning
account (e.g., $1,500). The total owed, including purchases, cash more than one card increases the credit available, but most likely increases
advances, finance charges, and fees, cannot exceed this limit. problems as well. Try to use only one card.

Delinquent account. An account that is not paid on time Always pay on time, even if it is only the minimum payment. If you do not pay on
or one where the minimum payment has not been met. time, you will you be charged substantial late fees and will risk losing your good
credit rating, which affects your ability to borrow in the future. Delinquent accounts
remain part of your credit records for years.

Due date. The date your payment must be received and after Avoid late fees and finance charges by paying at least a week in advance.
which you will be charged a late fee. Mathematical and Financial Literacy

Finance charges. The total cost of credit, including interest, The only way to avoid finance charges is to pay your balance in full by the due
service fees, and transaction fees. date. If you keep your balance low, you will be more able to pay it off.

Minimum payment. The smallest amount you can pay by Making only the minimum payment each month can result in disaster if you
the statement due date. The amount is set by the credit card charge more than you can afford. When you make a purchase, think in terms
company. of total cost.

Outstanding balance. The total amount you owe on If you carry a balance over several months, additional purchases are hit with
your card. finance charges. Pay cash for new purchases until your balance is under control.

Past due. Your account is considered “past due” when you Look for past due accounts on your credit history by getting a credit report from one
fail to pay the minimum required payment on schedule. of the credit bureaus (Experian, TransUnion, and Equifax) or myFICO or Credit Karma.

just the accounts you have with those creditors. This means that if you are late
on your payment for an unrelated loan, your creditors can increase your credit
card interest rate.
■ Phishing emails. Phishing is a technique for obtaining private information ille-
gally. An email appearing to come from a legitimate business such as your credit
card company asks you to verify information such as your social security number
or PIN number. If you click on the link in the email, you are taken to a fraudulent
website where any personal information you enter can be stolen. To avoid phish-

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