College student credit card products must be handled responsibly and with added care both by credit card issuers and by student credit card consumers. For students, establishing a credit history is the first step toward becoming financially independent. Students as a group, however, have a much higher rate of defaulting on their credit obligations than any other demographic. It is essential that student applicants review and understand interest rates, penalties, and the terms and conditions of introductory offers. If students educate themselves and exercise restraint in their use of credit, students can build a strong financial foundation upon which to build after graduation.
In almost all instances, credit cards charge fees. It is crucial that student credit card holders read the credit card agreement and understand what their credit card fees are or can be at some point in the future. Here are some credit card fees to look out for when you apply for a student credit card:
Application Fee. The application fee is a fee that may be charged to apply for a credit card.
Annual Fee. An “annual fee,” also referred to as a “membership fee” or “participation fee,” is the amount charged to the credit card customer for the privilege of having the credit card.
In some instances, the credit card issuer charges a lump sum annual fee. In other instances, the credit card issuer spreads the cost out and charges a portion of the fee every month.
Set-Up Fee. A “set-up fee” is an amount that a credit card issuer might charge when the new credit card holder opens a new account.
Cash Advance Fee. A “cash advance fee” is the sum that is charged by the credit card issuer when the credit card is used to get cash from an ATM. The fee may be a flat fee (e.g., $5 per transaction), or the fee may be a percentage of the total amount of the cash advance (e.g., 2% percent of the total amount of cash advanced, including any ATM fees).
Balance-Transfer Fee. A “balance-transfer fee” is an amount charged by the credit card issuer when the credit card holder transfers a balance from one credit card to another. Like the “cash advance fee,” the “balance-transfer fee” may be a flat fee (e.g., $5 per transaction) or it may be a percentage of the transfer (e.g., 2% percent of the total amount transferred).
Late-Payment Fee. A “late-payment fee” is a sum charged by the credit card issuer when the credit card holder submits a payment that is received after the due date.
Over-The-Limit Fee. An “over-the-limit fee” is an amount charged by the credit card issuer when the credit card holder exceeds the credit card’s credit limit. Under the law, the credit card customer must authorize the credit card issuer to permit you to go over your limit in order for the credit card issuer to charge the “over-the-limit fee.” If the card holder does not authorize the credit card issuer to permit you to go over your credit limit, your transaction will most likely be declined.
Credit-Limit-Increase Fee. A “credit-limit-increase fee” is a sum charged by the credit card issuer when the credit card holder requests and receives an increased credit limit.
Read Your Agreement & Understand Your Rights. Be certain to read the terms of the credit card agreement carefully to understand the services offered by credit card issuers along with all the associated fees. Federal law limits the total fees charged during the first year after new account is opened to 25% of the initial credit limit. In some instances, the credit card issuer may also offer insurance or debt coverage – for a fee.
Similar articles:
Best Student Credit Cards for 2012
